Ella 
On Friday, the U.S. dollar exhibited a modest decline against a basket of global currencies, driven by investor scrutiny of the latest jobs report. The report revealed robust hiring across various sectors in the United States for September, but also signaled a deceleration in wage growth.
The dollar index, a gauge of the greenback’s strength against six major currencies, eased by 0.31% to reach 106.03.
The index briefly surged to 106.98 earlier in the session following the release of data indicating that the U.S. nonfarm payrolls had expanded by an impressive 336,000 jobs the previous month. Furthermore, the numbers for August were revised upwards to reflect an addition of 227,000 jobs, as opposed to the initially reported 187,000. This surpassing of expectations, with economists polled by Reuters forecasting an increase of only 170,000 jobs for September, had an immediate impact on market sentiments.
Karl Schamotta, Chief Market Strategist at Corpay in Toronto, commented on the data, stating, “This morning’s data pushed expectations for the first rate cuts further into late 2024, but failed to convince market participants of another hike this year, meaning that short-term yields – which play a dominant role in driving foreign exchange moves – remained relatively stable.
Following the release of the payrolls report, U.S. rate futures calculated a 42% probability of a rate increase by the end of the year, up from approximately 33% on the previous day, according to the CME’s FedWatch tool.
The recent strength of the U.S. dollar has been influenced by a swift sell-off in U.S. government bonds, which has driven yields to multi-year highs. Benchmark 10-year notes reached 4.887%, and 30-year yields hit 5.053%, both levels not seen since 2007. However, two-year notes rose to 5.151%, remaining below the 5.202% level observed on September 21.
The payrolls data also revealed moderate monthly wage growth, with average hourly earnings increasing by 0.2%, mirroring the gains seen in August. Over the 12 months leading up to September, wages grew by 4.2%, slightly lower than the 4.3% growth recorded in August.
Tony Welch, Chief Investment Officer at SignatureFD in Atlanta, remarked, “When we go through the report today, average hourly earnings are probably soft enough that the Fed doesn’t need to hike, but we’ll see what happens with inflation, I think it still keeps that on the table.”
For the week, the dollar index posted a marginal 0.1% decrease, putting an end to an 11-week streak of gains that had propelled it to an overall gain of about 6%.
Helen Given, FX Trader at Monex USA, attributed the dollar’s retreat on Friday to “a small bit of profit taking.”
Attention is now shifting to next week’s U.S. inflation data, which could provide insights into the Federal Reserve’s future actions.
Karl Schamotta of Corpay expressed, “If next week’s U.S. consumer price data pushes yields even higher, we should see safe-haven flows beginning to add to rate differentials in supporting the greenback.”
Meanwhile, against the Japanese yen, the dollar was up by 0.54%, trading at 149.31 yen, as it hovered near the 150 mark—a level that has been closely monitored for signs of possible intervention by Japanese officials to counteract a prolonged depreciation of the yen.
The British pound also made gains, rising by 0.43% to $1.22445. This positive performance at the end of the week signals optimism for the British currency, hinting at the possibility of a larger rebound.
