NEW YORK: The dollar was on track for a fourth straight weekly gain against the euro on Friday, supported by elevated US Treasury yields amid a selloff in European government bond markets and expectations the Federal Reserve will maintain its hawkish interest rate stance.
The greenback trimmed some of its recent gains after data showed US job growth in September fell short of economists’ expectations and the unemployment rate edged up to 4.2 percent. Benchmark 10-year Treasury yields also slipped after the report and were last trading at 5.191 percent.
Still, the dollar remained underpinned by US yields that are hovering near multi-decade highs, rising concerns over the fiscal outlook in parts of Europe, and higher oil prices.
The increase in crude prices has prompted some investors to reduce exposure to currencies of major energy importers, including the euro and the yen.
The euro is on track for its fourth straight week of losses against the dollar, the longest such stretch since mid-May 2025. It was last up 0.39 percent at USD1.1285.
“When I look at the (jobs) data in aggregate, I think about it as actually a Goldilocks set of numbers: so activity is still pretty resilient but it’s not generating significant inflationary pressure,” said Dominic Bunning, head of G10 FX strategy at Nomura.
“That’s a good backdrop from a broad economic perspective. It should be a relatively good number for risk assets in general and for high beta currencies. It also probably at the margin doesn’t have a huge impact on Fed pricing, but it removes a little bit of tail risk as to whether they would hike again in October.”
The US central bank raised rates and signaled more hikes after the end of its policy meeting last month, with Fed Chairman Kevin Warsh reaffirming monetary policy independence despite repeated calls from US President Donald Trump for lower borrowing costs. Markets responded by raising their bets on further tightening.
Traders are pricing in an 86 percent chance that the Fed will hold rates steady later this month, compared with 36 percent a week earlier, according to CME Group’s FedWatch tool.
The dollar weakened 0.49 percent to 0.827 against the Swiss franc, but it is still on track for a sixth straight weekly gain — its longest stretch since November 2024.
The greenback was also down 0.33 percent to 157.55 against the Japanese yen, but on track for its third straight weekly increase.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.29 percent to 101.68. It is set for its third straight weekly gain.
Trump said European countries have agreed to release diesel stocks. The White House had pressured governments to do so, in a bid to cool surging fuel prices linked to the Iran war.
Euro zone inflation is likely to increase in the coming months, keeping pressure on the European Central Bank to raise rates.
French and Italian government bonds have come under selling pressure in recent weeks amid expectations of rising policy rates and growing political risk as 2027 elections loom, with French 10-year yields jumping on Thursday to their highest level since 2002.
The premium of French 10-year government bond yields over safe-haven German ones rose to above 150 basis points on Friday, its highest since late 2011, as worries about France’s finances and political turmoil grew.
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