Dollar Heads for Strongest Week in Over a Month as Mixed U.S. Jobs Data Clouds Fed Outlook

The U.S. dollar was poised for its strongest weekly gain in more than a month on Friday, as investors grew increasingly doubtful that the Federal Reserve will cut interest rates in December. A delayed and mixed U.S. nonfarm payrolls report added to market uncertainty, showing stronger job growth in September but also a rise in the unemployment rate to 4.4%, the highest in four years.

The conflicting data reinforced expectations that the Fed may hold rates steady next month, especially as policymakers navigate the added uncertainty from the U.S. government shutdown. Markets are now pricing in just a 27% chance of a rate cut in December. Analysts at Wells Fargo noted that while they believe a 25-basis-point cut would be appropriate, a decision to hold rates “would not surprise” them given current conditions.

The dollar index climbed to around 100.20, flirting with a 5½-month high and on track for a weekly rise of nearly 1%. The euro hovered near a two-week low at $1.1528, heading for a 0.8% weekly loss, while the British pound traded at $1.3084 but was still set for a 0.7% decline for the week ahead of the U.K.’s crucial budget announcement.

The yen briefly strengthened after Japanese Finance Minister Satsuki Katayama warned that currency intervention remained an option amid what Tokyo views as excessive and speculative market moves. Still, the yen stayed near a 10-month low at 157.33 per dollar and was poised for a nearly 2% weekly slide as concerns about Japan’s worsening fiscal outlook deepened. Prime Minister Sanae Takaichi’s massive 21.3 trillion-yen stimulus plan has fueled worries over rising debt and pressured Japanese bonds and the currency.

Analysts warn that if Japan intervenes, such efforts may be short-lived “speed bumps” rather than lasting solutions. Meanwhile, fresh data showing Japan’s core consumer prices rising 3.0% in October kept expectations of a potential Bank of Japan rate hike alive.