The US dollar is on track for a modest weekly gain as investors balance the Federal Reserve’s hawkish tone with persistent concerns about the US economy.
The dollar began a five-day winning streak last week after Fed Chair Jerome Powell acknowledged the “risks” of further monetary easing, but it reversed sharply on Thursday following weak labor market data.
US Treasury yields also declined amid growing uncertainty caused by the ongoing government shutdown in Washington and the legal debate surrounding President Donald Trump’s proposed tariffs.
Mohit Kumar, economist at Jefferies, said: “The December Fed meeting is essentially a coin toss—it will depend heavily on the labor market. The market tends to overreact to any job-related signals.”
He added: “Powell’s comments at the latest FOMC meeting suggest that the likelihood of a rate cut in December remains low.”
Due to the prolonged US government shutdown and the delay in publishing the monthly nonfarm payrolls report, traders have turned to private-sector data showing that the economy lost jobs in October across government and retail sectors. Cost-cutting initiatives and increased use of artificial intelligence have also fueled a surge in layoffs.
Barclays Bank forecast earlier this week a 60% chance that the record-long government shutdown will end between November 11 and 21, compared with a 15% chance of it lasting until December.
The US Dollar Index, which measures the greenback’s performance against six major currencies, rose 0.14% to 99.81, heading for a weekly increase of about 0.08%. The index regained some momentum but continues to trade within the same range it has maintained since August.
Analysts noted that the earlier flight to safe-haven assets helped the dollar recover part of its appeal as a defensive hedge, although the Japanese yen remains the market’s preferred safe-haven currency.
Meanwhile, technology-heavy equity markets are poised for their largest weekly losses in seven months.
Traders increased their bets on a rate cut despite comments from Chicago Fed President Austan Goolsbee, who said Thursday that the absence of official inflation data due to the government shutdown “adds to his caution” about further easing. In an interview with CNBC, he added: “When visibility is poor, we must be more careful and move slowly.”
Futures markets currently imply a 65% probability of a rate cut at the next Federal Reserve meeting on December 10, according to the CME FedWatch tool.
The euro slipped 0.1% against the dollar to $1.1535 but outperformed other European currencies, including the British pound and the Swiss franc.
In China, exports fell unexpectedly in October, marking their largest decline since February, after months of accelerated US orders to avoid tariff deadlines. The data suggests Beijing is struggling to diversify its export markets away from the US, potentially increasing pressure on European markets.
The euro continues to find support from expectations that the European Central Bank will hold interest rates steady, while both the US and UK are projected to resume rate cuts in 2026.
The dollar rose 0.23% against the Japanese yen to ¥153.41, after touching ¥152.82 earlier—its lowest level since October 30.
The Australian dollar held steady at $0.6480, while the New Zealand dollar (the kiwi) fell 0.4% to $0.5609.
