*

Graphic: World FX rates Link

By Karen Brettell

NEW YORK, Jan 6 (Reuters) - The dollar fell on Friday after U.S. jobs data showed a strong, but not blockbuster employment picture in December, while a separate report showed that U.S. services industry activity contracted for the first time in more than 2-1/2 years that month.

Employers added 223,000 jobs in December, more than economists’ forecasts of 200,000.

Wages also grew by 0.3% last month, a drop from 0.4% in November and below forecasts of 0.4%. That lowered the year-on-year increase in wages to 4.6% from 4.8% in November.

"There was a bit of a fear that this could be quite a blockbuster print in terms of job growth," which was a risk due to seasonal adjustments that are common in December, said Mazen Issa, senior foreign exchange strategist at TD Securities in New York.

The easing wage growth was also "encouraging," Issa added, though he noted that there were hawkish elements in the data.

"You had the unemployment rate dropping, which was not expected, and an increase in the participation rate," Issa said. "This number doesn’t do anybody any favors in determining whether the Fed needs to do 25 or 50 at its next meeting."

Atlanta Fed President Raphael Bostic said on Friday that the jobs figures did not change his overall assessment of where the economy is headed and that he would be comfortable with a rate hike of either 25 basis points or 50 basis points in February.

The greenback extended losses after the Institute for Supply Management (ISM) said its non-manufacturing PMI dropped to 49.6 last month from 56.5 in November. It was the first time since May 2020 that the services PMI fell below the 50 threshold, which indicates contraction in the sector that accounts for more than two-thirds of U.S. economic activity.

The Commerce Department also said on Friday that factory orders dropped 1.8% in November, after gaining 0.4% in October. Economists polled by Reuters had forecast orders falling 0.8%.

The dollar was last down 0.57% on the day against a basket of currencies =USD at 104.50, after earlier reaching 105.63, the highest since Dec. 7.

The euro EUR=EBS gained 0.64% to $1.0587, and the dollar fell 0.42% against the yen JPY=EBS to 132.89.

The Federal Reserve hiked rates by 50 basis points at its December meeting, after making four consecutive 75-bp increases.

Fed funds futures traders increased bets the Fed will hike rates by 25 bps at the conclusion of its two-day meeting on Feb. 1 after Friday's data. A 25-bp increase is now seen as a 75% probability, compared with 54% before the jobs report, with a 50-bp hike now seen as a 25% probability. FEDWATCH

Highly anticipated consumer price data due on Jan. 12 could influence U.S. central bank policy.

It is expected to show that headline prices were unchanged in December while core prices increased 0.3%. USCPI=ECI USCPF=ECI

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

Currency bid prices at 10:29AM (1529 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

104.5000

105.1200

-0.57%

0.976%

+105.6300 +104.3900 Euro/Dollar

EUR=EBS

$1.0587

$1.0521

+0.64%

-1.19%

+$1.0600

+$1.0482 Dollar/Yen

JPY=EBS

132.8900

133.4100

-0.42%

+1.33%

+134.7650 +132.6400 Euro/Yen

EURJPY=

140.70

140.36

+0.24%

+0.29%

+141.4400 +140.2400 Dollar/Swiss

CHF=EBS

0.9323

0.9363

-0.46%

+0.79%

+0.9407

+0.9311 Sterling/Dollar GBP=D3

$1.1990

$1.1908

+0.70%

-0.85%

+$1.2016

+$1.1842 Dollar/Canadian CAD=D3

1.3527

1.3568

-0.32%

-0.18%

+1.3664

+1.3516 Aussie/Dollar

AUD=D3

$0.6807

$0.6752

+0.82%

-0.13%

+$0.6822

+$0.6722 Euro/Swiss

EURCHF=

0.9869

0.9851

+0.18%

-0.26%

+0.9883

+0.9849 Euro/Sterling

EURGBP=

0.8827

0.8835

-0.09%

-0.19%

+0.8870

+0.8817 NZ

NZD=D3

$0.6284

$0.6223

+1.00%

-1.01%

+$0.6291

+$0.6193 Dollar/Dollar

Dollar/Norway

NOK=D3

10.0815

10.2595

-1.44%

+3.03%

+10.3005

+10.1115 Euro/Norway

EURNOK=

10.6781

10.7654

-0.81%

+1.76%

+10.8140

+10.6631 Dollar/Sweden

SEK=

10.6094

10.6804

-0.01%

+1.94%

+10.7479

+10.5973 Euro/Sweden

EURSEK=

11.2284

11.2290

-0.01%

+0.71%

+11.2924

+11.2198
Reporting by Karen Brettell; Editing by Andrea Ricci