Dollar's Four-Day Streak Ends on Weaker Jobs Report

The US dollar's four-day winning streak came to an end on Friday after a weaker-than-expected jobs report reduced expectations for imminent Federal Reserve interest rate hikes. The greenback had been gaining due to a relentless rout in U.S. Treasury bond markets and the decline of the euro.

The Bureau of Labor Statistics reported that nonfarm payrolls rose 29k last month, significantly lower than the estimated figure of 89k. This was the slowest monthly growth of the year, and the unemployment rate ticked up to 4.2% in September from 4.1% in August.

The reaction in Fed October rate expectations reflected this, with odds of a quarter-point rate hike falling to nearly 23%, while those of the central bank holding rates steady surged to about 77%. The probability of rate hikes had slipped earlier in the week as well after the latest reading on the Fed's preferred inflation gauge came in softer than anticipated and showed a moderation from the previous month.

The dollar's advance was also driven by a bond sell-off, which has been one of its main drivers this week. The 2-year yield fell 3.3 basis points so far this week, while longer-end maturities have suffered due to oil-related inflationary concerns and ballooning fiscal debt.