Dollar Heads For Biggest Weekly Drop Since April As Weak Jobs Data Cuts Fed Hike Bets

A disappointing June jobs report has sent the US dollar toward its sharpest weekly decline in nearly three months, with markets quickly scaling back expectations for a Federal Reserve rate hike and giving battered currencies like the yen a rare moment of relief.

The dollar index was down 0.58% for the week at 100.77 in early Asian trade on Friday, its biggest weekly drop since early April, after falling 0.5% on Thursday alone.

What The Jobs Report Said

US job growth slowed sharply in June, with non-farm payrolls rising by 57,000, well below market expectations of 110,000. The labour force participation rate also fell to 61.5%, its lowest level in more than five years.

The weaker-than-expected data led traders to scale back expectations of a near-term interest rate hike by the Federal Reserve. According to CME FedWatch, markets are now pricing in a 52% chance of a rate hike at the September meeting, down from 64% a day earlier.

US Treasury yields also eased from recent highs. The yield on the interest rate-sensitive two-year Treasury note fell by four basis points, snapping a three-day gaining streak.

How Other Currencies Moved

• Euro: Hovering near two-week highs at $1.1442.

• Sterling: Firm at $1.3361, on track for a 1.2% weekly gain, its best in nearly three months.

• Australian dollar: At $0.6935, set to snap a four-week losing streak.

• New Zealand dollar: At $0.5702, up 1.2% for the week.

• Japanese yen: At 161.01 per dollar after rallying nearly 1% on Thursday.

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The Yen Situation

The yen's bounce from multi-decade lows has come as Japanese officials shifted tactics, abandoning their habit of publicly telegraphing intervention risks in favour of a more targeted approach designed to squeeze short-sellers and raise the cost of betting against the currency. A government panel member called on the Bank of Japan to continue raising rates at a moderate pace to address excessive yen weakness.

Analysts flagged 162.83 as a short-term top for dollar-yen, with the next move depending on incoming US economic data and developments in Japan's government bond market.

The broader dollar outlook remains constructive against low-yielding currencies as long as Fed rate hike expectations stay in place, though the weak jobs print has clearly taken some of the urgency out of that narrative for now.