By Chuck Mikolajczak

NEW YORK (Reuters) – The dollar pulled back from a one-week high against a basket of major currencies on Friday after a dismal December U.S. payrolls report highlighted the need for further stimulus measures to prop up an economy battered by the coronavirus and its related government lockdown measures.

The Labor Department said nonfarm payrolls decreased by 140,000 in December, the first decline in eight months, well below expectations that called for a still-weak increase of 71,000 jobs. The unemployment rate was 6.7%. Economic data during the week leading up to Friday’s report indicated a stalling labor market.

The greenback had been climbing from a nearly three-year low on Thursday and reached a high of 90.132 on Friday ahead of the data, its highest level since Jan. 1, as a rise in U.S. yields helped fuel the unwinding of bearish bets on the currency, with traders taking profits against the euro in particular.

Still, the pullback was somewhat muted as investors expect additional stimulus measures to help buttress the economy until vaccine rollouts allow for the easing of lockdown measures.

“We have weaker-than-expected non-farm payrolls on the surface here, but not truly shocking considering the unexpected miss, job loss recorded … on Wednesday,” said Erik Bregar, head of FX strategy at Exchange Bank Of Canada, Toronto.

“Hence, we saw the very tepid knee-jerk bid for the broader U.S. dollar, then sell-off. The much better-than-expected wage growth, which nobody was expecting, also takes some of the sting out of the headline job loss.”

The dollar index last rose 0.043% at 89.84.

Democrats won effective control of the Senate this week, while chaos gripped Washington. Congressional Democrats on Friday weighed impeaching President Donald Trump for a second time after his false claims of election fraud helped encourage a mob that stormed the U.S. Capitol. [nL1N2JJ0UU]

The Democrats’ Senate seat wins give President-elect Joe Biden latitude to push through more spending, which some analysts predict will fuel risk appetite and be negative for bonds and the dollar, although a strongly bearish consensus outlook for the greenback at the end of 2020 has eased somewhat.

The dollar index dropped 7% in 2020 and as much as 0.9% in the first few days of the new year on expectations of U.S. fiscal stimulus. But since hitting its lowest level since March 2018, the greenback has found some footing, climbing as much as 1%.

Both the euro and the pound strengthened against the dollar in the wake of the payrolls report. The euro was last down 0.14% to $1.2253 while Sterling was last trading at $1.3588, up 0.18% on the day.

Bitcoin hit a fresh all-time high of $41,802.84, and last rose 4.32% to $41,217.91, after smashing through $40,000 for the first time on Thursday.

========================================================

Currency bid prices at 9:49AM (1449 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 89.8400 89.8150 +0.04% +0.00% +90.1320 +89.6640

Euro/Dollar $1.2254 $1.2270 -0.13% +0.30% +$1.2285 +$1.2213

Dollar/Yen 103.8550 103.8300 +0.00% +0.53% +104.0850 +103.6300

Euro/Yen 127.27 127.37 -0.08% +0.27% +127.4600 +126.9600

Dollar/Swiss 0.8845 0.8855 -0.13% -0.04% +0.8884 +0.8825

Sterling/Dollar $1.3589 $1.3565 +0.24% -0.48% +$1.3636 +$1.3540

Dollar/Canadian 1.2697 1.2690 +0.05% -0.30% +1.2707 +1.2659

Aussie/Dollar $0.7769 $0.7769 +0.02% +1.01% +$0.7798 +$0.7741

Euro/Swiss 1.0838 1.0860 -0.20% +0.29% +1.0863 +1.0826

Euro/Sterling 0.9015 0.9044 -0.32% +0.87% +0.9050 +0.8994

NZ $0.7252 $0.7256 -0.01% +1.03% +$0.7280 +$0.7240

Dollar/Dollar

Dollar/Norway 8.3955 8.4260 -0.32% -2.19% +8.4630 +8.3630

Euro/Norway 10.2895 10.3400 -0.49% -1.70% +10.3610 +10.2715

Dollar/Sweden 8.2073 8.1717 +0.12% +0.15% +8.2293 +8.1809

Euro/Sweden 10.0595 10.0473 +0.12% -0.18% +10.0690 +10.0358

(Additional reporting by Gertrude Chavez-Dreyfuss, Editing by Nick Zieminski)