Dollar Index Hits 9-week Low

The dollar index climbed to around 102.5 on Monday, hitting its highest levels since April 2025 as the euro weakened sharply on fresh political uncertainty in Spain that added to concerns over France's political instability and and worsening fiscal outlook. The greenback also strengthened even as traders scaled back expectations for an imminent Federal Reserve rate hike following weaker-than-expected US jobs report. Data released Friday showed the US economy added just 29,000 jobs in September, well below expectations of 90,000, following a downwardly revised gain of 133,000 in August. The unemployment rate climbed to 4.2%, while annual wage growth unexpectedly slowed to 3.0%, its weakest pace since May 2021. Markets are now pricing in nearly an 80% chance that the Fed will keep policy unchanged this month, while expectations for a December hike remained around 69%.

The dollar index slipped below 102 on Friday, ending a four-session advance as unexpectedly weak US employment data reduced expectations for further Federal Reserve tightening. Nonfarm payrolls increased by just 29,000 in September, falling short of estimates. The figures also incorporated downward revisions to employment growth in the previous two months. Meanwhile, the unemployment rate edged up to 4.2%, pointing to a more cautious hiring environment as businesses contend with higher costs. The disappointing report prompted money markets to scale back expectations of an interest-rate increase at the Fed’s October meeting. Falling oil prices provided additional support, with Brent crude dropping below $100 a barrel and easing some concerns over energy-driven inflation. Despite Friday’s decline, the dollar remained on track for a 0.9% weekly gain, which would mark its third consecutive weekly advance.

The dollar index strengthened above 102 on Friday and was on track for a third consecutive weekly gain, supported by robust US economic strength, elevated Treasury yields and heightened geopolitical uncertainty in the Middle East. Treasury yields surged to their highest levels since 2002 this week, widening the dollar’s interest-rate differential over other major currencies. Investors also assessed signs of a resilient US labor market ahead of the September jobs report. Minneapolis Fed President Neel Kashkari said it remains unclear how high interest rates will need to rise to bring inflation under control, emphasizing that the Fed must take the necessary steps to return inflation to its target. Meanwhile, oil prices climbed as the US considered deploying an additional aircraft carrier and 10,000 troops to the Middle East, raising concerns over further disruptions to regional energy supplies and renewed inflationary pressures.