DXY Snaps 4-Day Gain After Jobs Report

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.

The dollar index extended gains for a fourth consecutive session, starting Q4 on a firm footing and touching 102, its highest level since March 2025. The dollar continued to benefit from expectations of further Fed tightening amid elevated inflationary pressures stemming from the situation in the Middle East and resilient US economic performance. Meanwhile, Minneapolis Fed President Kashkari said on Wednesday that price pressures remained elevated, even after PCE inflation, the Fed’s preferred inflation gauge, came in below expectations. While the probability of a hike in October has fallen to around 37%, from roughly 70% last week, traders have fully priced in another 25bps Fed rate hike this year and nearly four additional hikes by the end of next year. The greenback was mostly higher against the yen, the pound and the euro.