SYDNEY/TOKYO, July 4 (Reuters) – The dollar held firm at one-week highs on Friday, having pulled sharply ahead of its peers after surprisingly strong U.S. jobs growth added to hopes the economy is pulling out of a first quarter slump.

The dollar index  .DXY climbed as far as 80.315 after U.S. employers blew away most forecasts by adding 288,000 jobs last month. It was last at 80.205, well off an eight-week trough of 79.740 plumbed earlier in the week. (Full Story)

Against the yen, the greenback hovered near a two-week high at 102.13  JPY=. It was up 0.7 percent so far this week, on track for its best performance in 2-1/2 months.

“The data supports expectations for the Fed to begin coaxing the Fed funds rate higher by the middle of next year,” analysts at BNP Paribas wrote in a note to clients.

“Markets are now on alert for any change of message from the Fed in response to the better data.”

The market will have an opportunity to gauge any change of message, particularly from Fed Chair Janet Yellen, at the Fed’s July 29-30 policy meeting and the annual global central banking summit at Jackson Hole, Wyoming, in August.

“The dollar’s gains look limited considering how strong the jobs data was, as participants are still unsure how U.S. inflation pans out,” said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

“The possibility of Fed’s Yellen shifting to a more hawkish stance has added to the uncertainty. Upcoming data such as retail sales, consumer prices and personal consumption expenditure (PCE) may help clear the mist, if they point to an inflationary trend taking hold.”

The U.S. two-year Treasury yield jumped to a 10-month peak  US2YT=RR and Wall Street hit a record high, with the Dow  .DJI ending above 17,000.

The euro, further weighed by a dovish-sounding European Central Bank, shed more than half a U.S. cent to $1.3605  EUR=, on course to lose more than 0.3 percent on the week.

The single currency fell back from a one-month high against its Japanese counterpart to 138.96  EURJPY=R, from 139.30.

The ECB, as expected, left interest rates steady at record lows on Thursday but said it stood ready to do more if needed.

However, it sounded confident that a raft of policy measures introduced last month will help lift inflation and support bank lending. (Full Story)

The Australian dollar, already on the ropes after the country’s central bank said it was overvalued, fell to its lowest in over two weeks.

The Aussie plumbed $0.9327  AUD=D4, bringing the June 18 trough of $0.9322 into focus. It was last at $0.9357, well off an eight-month peak of $0.9505 set early in the week.

The Swedish crown took a hammering after the Riksbank cut its key interest rates by an unexpectedly large 50 basis points to 0.25 percent.

Adding to the drama, governor Stefan Ingves had wanted a quarter-point cut, but was outvoted by his rate-setting colleagues. (Full Story)

The Swedish crown  EURSEK=D4 fell to its lowest against the euro in almost three years, reaching 9.3900 crowns per euro from 9.1950 before pulling back a little to 9.2910. Against the dollar, it slumped to a two-year low of 6.8749 per dollar  SEK=.

Meanwhile, despite the jobs-inspired rally, the greenback was stuck near a fresh six-month low of C$1.0620  CAD=D4 hit against its Canadian counterpart on Thursday. The dollar only managed a very slim gain on sterling, which stayed near a six-year peak of $1.7180  GBP=D4.



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