US Dollar Index (DXY) News: Dollar Finds Support Despite Weak Jobs Data and Flat Treasury Yields

Dollar Rebounds After Mixed U.S. Jobs Data

The U.S. dollar initially weakened on Friday, hitting a one-month low against the yen and its softest level in a week against the euro after mixed U.S. employment data for August. However, the greenback rebounded, finding support around the 100.617 to 100.534 levels. Despite this recovery, traders remain cautious as concerns about a slowing U.S. economy and potential Federal Reserve rate cuts persist. Nonetheless, the short-term trend will change to up, following a breakout over 101.917. Prices could accelerate if buyers can take out the pivot at 102.040.

August Job Growth Falls Short of Expectations

Nonfarm payrolls increased by 142,000 in August, according to the U.S. Labor Department, marking an improvement from July’s revised figure of 89,000. However, the number came in below the 161,000 expected by economists, raising further concerns about the strength of the U.S. labor market. The unemployment rate remained steady at 4.2%, in line with forecasts.

Adding to the uncertainty, private payrolls expanded by only 99,000 in August, significantly below the 140,000 forecast. This combination of weaker-than-expected growth in both nonfarm and private payrolls has heightened fears of a softening labor market, compounding concerns following July’s disappointing data.

Treasury Yields Flat as Fed Rate Cut Bets Rise

U.S. Treasury yields remained mostly unchanged on Friday, as investors weighed the latest jobs data. The 10-year yield fell slightly to 3.732%, while the 2-year yield dropped more than 4 basis points to 3.714%. These moves reflect growing anticipation that the Federal Reserve may cut interest rates at its September 18 meeting.

CME Group’s FedWatch tool now shows a 57% probability of a 25-basis-point rate cut and a 43% chance of a larger 50-basis-point reduction. Investors will closely monitor upcoming inflation data and Fed commentary in the coming weeks for further clues on monetary policy direction.

Dollar Index Recovers but Stays Weak; Gold Moves Lower

In Forex markets, the U.S. dollar index (DXY), which measures the dollar’s strength against a basket of six major currencies, is down nearly 0.8% for the week. The dollar briefly lost 1% against the yen, touching 142.69, its weakest since early August, before recovering. The euro also held firm near $1.11145, just below a one-week high, while the British pound hovered around $1.3174.

Meanwhile, gold (XAU/USD) prices edged lower after the jobs report but remained close to their recent highs. Gold remains within striking distance of its August 20 record high of $2,531.77, reflecting ongoing safe-haven demand amid market uncertainty.

Analysts at TD Securities pointed out that “bad news is being priced into the dollar,” as traders anticipate more economic headwinds. The focus is now on the Federal Reserve’s upcoming policy decision, with key officials expected to provide further guidance in the lead-up to the meeting.

Market Forecast: Bearish Dollar Outlook

With the latest labor data falling short of expectations, the U.S. dollar is likely to remain under pressure. Expectations for a Fed rate cut are growing, which could further weaken the dollar in the short term. The yen and euro may continue to benefit from dollar softness, while Treasury yields are expected to remain subdued as economic concerns mount. Traders should watch for additional downside risks as the Fed’s policy decision approaches.