The dollar edged lower on Friday after softer-than-expected U.S. nonfarm payrolls data kept rate-hike fears in check, while hot Tokyo inflation lifted the yen and a surprise jump in euro zone prices pressured the European Central Bank. The dollar still remains on track for a third straight weekly gain.
Broader currency markets stayed muted as investors digested an unrelenting sell-off in global bond markets and a surge in energy prices, rekindling worries about persistent cost pressures.
Still, the dollar index and dollar index futures both dipped roughly 0.2%, even as the currency stayed on course for a 1% weekly advance on Friday. That would mark a third consecutive week of gains for the greenback, which held near its highest levels since April 2025.
Soft payroll print in focus
September nonfarm payrolls were tipped to show the U.S. economy added 89,000 roles, down sharply from 162,000 in August. The unemployment rate was seen holding at 4.1%, matching August's level. Recent personal consumption expenditures data had already shown a slight cooling, though core inflation remains comfortably above the Fed's 2% annual target. Any unexpected strength in the employment figures was likely to heighten expectations for further rate increases.
Yen firms on Tokyo inflation hit
The Japanese yen gained ground, sending the dollar/yen pair down nearly 0.2%. Tokyo consumer price data showed both headline and core inflation climbing to their highest levels since November 2025, well clear of the Bank of Japan's 2% target.
That print reinforced bets that the BOJ will follow its 25-basis-point rate hike in September with additional tightening ahead. The prospect triggered buying in Japanese government debt, pulling the benchmark 10-year yield down 1.25% after it hit 30-year highs earlier in the week.
Euro flat as inflation surges
Euro zone headline inflation jumped to 3.8% in September from 3.2% a month earlier, topping expectations for 3.6%. Natural gas and fuel costs drove most of the spike. Core inflation, which strips out volatile energy and food prices, edged up to 2.5% from 2.4%, driven by higher service-sector costs.
The acceleration in headline prices well above the ECB's 2% target strengthens hawkish calls for further rate hikes following two increases over the summer. Yet the euro picked up less than 0.1% in early trading, holding near its lowest levels in over a year. The single currency remained poised to close the week with a loss of more than 1.2%, its worst weekly performance since May 2026.
Source: Investing.com
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