WASHINGTON/LONDON, Dec 8 (Reuters) - The dollar rose on Friday after new data showed U.S. job growth accelerated in November and the unemployment rate dropped to 3.7%, pointing to underlying strength in the labour market.
The U.S. dollar index was last up 0.43% at 104.13. The yen was 0.15% lower against the dollar at 144.425, after staging its biggest rally in almost a year the day before.
U.S. non-farm payrolls added 199,000 jobs last month, the Labor Department's Bureau of Labor Statistics (BLS) said on Friday. Economists polled by Reuters had forecast 180,000 jobs created.
The employment report suggested that financial market expectations that the U.S. Federal Reserve could pivot to cutting rates as soon as the first quarter of 2024 were premature.
Traders of short-term U.S. interest-rate futures on Friday pared bets the Fed will start cutting interest rates in March after the report, and now see a May start to rate cuts more likely.
Markets had earlier priced in about a 60% chance of a March start to Fed rate cuts, but after the readout, pared that to just under 50%.
"In the short term, the U.S. rates market has just gotten I think way too dovish on the Fed," said Stephen Miran, co-founder of Amberwave Partners. "The massive ease in financial conditions since the start of November basically means that the Fed doesn't need to cut to throw fuel on that fire."
Although the yen was lower after the readout of the U.S. November jobs data, it surged by as much as 1.2% earlier on, adding to Thursday's 2% rally after Bank of Japan (BOJ) Governor Kazuo Ueda gave the clearest steer yet that the central bank is considering when to wrap up its negative rates policy. It was headed for its fourth weekly gain against the dollar on Friday.
The Japanese currency has vaulted to multi-month highs against a range of others in the last two days, although some of that strength dissipated over Friday's European trading session.
Thursday's rally was the largest one-day jump for the yen since January. But without more impetus from the BOJ, it may not have much more scope for outsized gains, according to Fiona Cincotta, City Index market strategist.
"Without anything for the market to get their teeth into from the BOJ, the sell-off (in the dollar) has been done," she said.
The momentum in the yen will likely remain subdued in the short term, agreed Miran at Amberwave Partners, "because it'll continue to be driven by the U.S. side until there's a material change from Japanese side."
The yen has fared best against higher yielding currencies, such as the pound. Sterling fell to a two-month low against the yen on Friday, but last recovered to rise 0.12% to 180.56.
Elsewhere, the euro fell 0.5% to $1.07375, while the pound dropped 0.7% to $1.251, and was set for a weekly decline.
The Australian dollar fell 0.58% to $0.65625, while the Chinese yuan weakened 0.19% to 7.1797 against the dollar in offshore trading.
Data on Thursday showed China's exports grew for the first time in six months in November, while imports shrank.
In cryptocurrencies, bitcoin last rose 1.13% to 43,780, hovering near its highest since April 2022.
Reporting by Hannah Lang in Washington and Amanda Cooper in London; Additional reporting by Rae Wee in Singapore; Editing by Kim Coghill, Mark Potter and Susan Fenton