Dollar Strength Persists Amid Weak Jobs Data and Higher Treasury Yields
The US dollar remained strong this week, with the dollar index DXY rising 0.31% to $102.25, marking a 4% gain so far this year. The index gained 1.22% over the past week as traders reduced expectations for an immediate Federal Reserve rate hike following a weaker-than-expected US jobs report. The economy added just 29,000 jobs in September, far below the 90,000 expected, while unemployment rose to 4.2% and wage growth slowed to 3.0%, its weakest since May 2021.
Despite the weaker jobs data, the dollar held firm due to elevated Treasury yields, which increased the appeal of US assets. A global bond selloff also supported safe-haven demand. US Treasury yields showed mixed movements, with the 10-year yield (US10Y) climbing one basis point to 5.27%, while the 2-year yield (US02Y) dropped 15 basis points to 4.81%.
Major currencies saw declines against the dollar, with the euro (EUR:USD) down 1.72%, the pound sterling (GBP:USD) off 0.33%, and the Japanese yen (JPY) falling 0.63%. The Chinese yuan (CNY:USD) dipped 0.09%, while the Swiss franc (CHF) gained 0.18%. The Australian dollar (AUD:USD) recovered slightly, up 0.14%, after hitting multi-month lows due to a stronger US dollar and high Treasury yields.
The Australian dollar's struggles persisted despite the Reserve Bank of Australia raising rates to 4.6%, as softer August inflation reduced expectations for another hike in November. Meanwhile, the euro fell further, down 0.48%, as Eurozone inflation rose to 3.8%, its highest since September 2023, driven by higher fuel prices. France’s fiscal concerns also weighed on the euro, while markets anticipate gradual policy tightening by the European Central Bank.