NEW YORK, June 2 (Reuters) - The dollar fell to seven-month lows on Friday after data showed the US economy created fewer jobs than expected last month, which could derail a possible interest rate hike by the Federal Reserve in the second half of this year.

Meanwhile, oil prices fell 2% on Friday as U.S. President Donald Trump's decision withdraw from the 2015 Paris Agreement to fight climate change prompted speculation of a further acceleration in U.S. drilling, sparking further worries over the global supply glut. Consequently, oil prices fell today.

As we've written before, weird things can happen when an economy approaches "full employment," namely that there's less scope for bumper growth in jobs every month.

"The rest is kind of this noise, the monetary policy, what's going on in DC", he said, referring to Washington. Germany's DAX index also set new highs. Both later trimmed gains closed the day higher. The S&P 500 .SPX gained 8.98 points, or 0.37 percent, to 2,439.04 and the Nasdaq Composite .IXIC added 52.95 points, or 0.85 percent, to 6,299.78.

The greenback fell to seven-month troughs against the euro and Swiss franc, while sliding to a two-week bottom versus the yen.

"This number is not the kind of report that derails the Fed from raising rates in June", said Tom Porcelli, chief USA economist at RBC Capital Markets in NY.

Duncan still believes the Fed will raise rates at the June 13-14 meeting, although a quarter-percent hike in the federal funds rate can no longer be viewed as a certainty.

The Wall Street's volatility index.VIX, which measures implied volatility of stocks and is often seen as investors' fear gauge, fell below 10, near a decade-low touched last month, in another sign of investors' confidence that markets will be stable at least for the time being.

Meanwhile, the other main news of the day was President Donald Trump's decision to withdraw the United States from the Paris Climate Accord, which could result in a rise in oil production.

Benchmark Brent crude futures were off 50 cents at $50.13 a barrel. U.S. West Texas Intermediate crude futures fell 87 cents to $47.49 per barrel.

A separate report showed U.S. factory activity picked up last month after slowing for two straight months.

By comparison, the US added 615,000 jobs between February and April of previous year, and 586,000 jobs in 2015.

IHS Markit's Manufacturing Purchasing Managers' Index for the euro zone rose to 57.0 in May, up from April's 56.7 and its highest level since April 2011.


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