Dollar Near Two-Month High as Strong U.S. Jobs Data Boosts Fed Rate Hike Expectations

The U.S. dollar remained close to a two-month high on Monday after a stronger-than-expected U.S. jobs report increased market expectations that the Federal Reserve could raise interest rates later this year. The upbeat employment data reinforced confidence in the strength of the U.S. economy despite ongoing global energy market pressures and geopolitical uncertainty.

According to the latest report, U.S. nonfarm payrolls rose by 172,000 jobs last month, significantly surpassing analysts’ forecasts. The stronger labor market data prompted investors to increase bets on future Federal Reserve rate hikes, supporting the dollar against major global currencies.

The euro weakened to a two-month low of $1.1507 against the U.S. dollar, while the British pound fell to a three-week low of $1.33165. Commodity-linked currencies also came under pressure, with the Australian dollar dropping to $0.7016 and the New Zealand dollar sliding to $0.5779, both reaching their lowest levels in two months.

Market analysts noted that a resilient U.S. labor market, combined with rising energy costs linked to geopolitical tensions in the Middle East, could keep inflation elevated and encourage tighter monetary policy. Capital Economics Chief Markets Economist Jonas Goltermann said the latest employment figures strengthen the case for additional Federal Reserve action, with expectations for two 25-basis-point rate increases before year-end.

Investor sentiment has also been influenced by escalating tensions involving Iran and Israel, adding to concerns about global energy supply disruptions. As a result, traders are increasingly positioning for higher interest rates, with CME FedWatch data indicating that markets now see more than a 70% probability of a Federal Reserve rate hike in December, up sharply from the previous week.

Meanwhile, the Japanese yen continued to weaken, trading near 160.34 per dollar. The currency has erased gains achieved after Japan’s recent market intervention. Investors are now focused on whether the Bank of Japan will signal a faster pace of interest rate increases amid rising inflationary pressures driven by higher fuel costs.

In the cryptocurrency market, Bitcoin rebounded more than 1% to $63,093.86 after recently touching its lowest level since October 2024. Ether also recovered, rising over 3% to $1,679.40 following a sharp decline that pushed it to a 14-month low.

Despite the recovery, cryptocurrencies continue to face challenges as investor capital flows toward booming artificial intelligence stocks and high-profile upcoming public listings, including SpaceX-related ventures. This shift in investor interest has weighed on Bitcoin’s performance throughout the year, limiting broader gains across the digital asset market.

The combination of strong U.S. economic data, growing expectations of Federal Reserve tightening, geopolitical risks, and shifting investment trends continues to shape global currency and cryptocurrency markets heading into the second half of 2026.