NEW YORK—The dollar steamed higher Friday as a government report showed U.S. unemployment falling for the first time in 15 months. "Finally the U.S. dollar rallies for the right reasons," said Ashraf Laidi, chief market strategist at CMC Markets. The dollar has tended to benefit in the past year from bad news due to its "safe haven" status. Spooked investors would cut their holdings of equities, foreign currencies and other riskier investments and barrel for the dollar and the U.S. government debt it could buy. The flipside of that meant that, ironically, the dollar has dropped in value throughout the spring and summer as companies release better-than-expected corporate earnings and many economists think the recession, if it hasn't ended already, will be over soon. The 16-nation euro tumbled to $1.4204 in morning trading from $1.4340 late Thursday. The British pound dropped to $1.6681 from $1.6776. The dollar also rose to 97.44 Japanese yen from 96.85 yen. The Labor Department said on Friday that employers cut 247,000 jobs last month, the smallest amount in a year. The unemployment rate dropped to 9.4 percent from 9.5 percent in June. Analysts had expected joblessness to grow to 9.6 percent. The unemployment rate hasn't fallen in 15 months. The report was "solid top to bottom," wrote Michael Woolfolk, senior currency strategist at the Bank of New York Mellon. The dollar rose in tandem with markets. The Dow Jones industrials were up 1.3 percent in morning trading, while the broader Standard & Poor's 500 gained 1.4 percent. The dollar index, which measures the dollar against a basked of currencies including the yen and euro, gained 0.9 percent. "The negative correlation between them appears to have been drawn into question—at least temporarily," Woolfolk said. And at some point during the economic recovery, this will be cemented, he said, and perhaps even before the Federal Reserve starts raising interest rates. Raising the interest rate from its current range near zero would boost the dollar, as it would make returns on investments more lucrative and attract funds from investors. The dollar could benefit if the U.S. returns to growth faster than other major economies, and it could also benefit from a return to "crisis conditions," Woolfolk said. Still, Brown Brothers Harriman analyst Marc Chandler cautioned that "one day a trend does not make." The dollar's push lower is nearing an end though, he said, and could start rising firmly by the end of the third quarter, when many economists expect the U.S. economy to grow. "The dollar will be rewarded as the economy recovers and U.S. rates rise ... The price action reaction to the U.S. jobs data is a small, preliminary taste of what we expect to materialize later this year." In other trading, the dollar rose to 1.0839 Canadian dollars from 1.0788 late Thursday, and was up to 1.0798 Swiss francs from 1.0656.

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