The U.S. dollar index rose 0.3% to 99.18 on Monday, reversing a weekly decline of 0.5%. The move was driven by a surprise surge in August non‑farm payrolls, which added 162,000 jobs, far above the 55,000 forecast. The unemployment rate held steady at 4.1%, and the Bureau of Labor Statistics revised June‑July payrolls upward by 55,000.
The stronger labour market lifted the 2‑year Treasury yield by 4.5 basis points to 4.379%, a 19‑month high, while the benchmark 10‑year yield rose 1.8 basis points to 4.780%. The CME FedWatch tool raised the probability of a 25‑basis‑point Fed rate hike on September 16 to roughly 58% from about 52% after the data release.
In the currency market, the Japanese yen rallied 1.9% in the previous session to reach a one‑month high of 155.30 per dollar, positioning it for a 2.5% weekly gain – its strongest weekly performance since late July. The USD/JPY pair therefore fell, while the Canadian dollar slipped 0.3% to 1.3830 as Canada reported a loss of 41,700 jobs in August, reversing July’s gain of 75,100 and missing expectations for a 15,000‑job increase.
Senior economist José Torres of Interactive Brokers noted that the payroll surprise “sent yields soaring” and “strengthened the probability of a rate hike in just 12 days.” He added that despite political commentary, “improving economic growth prospects are countering that adverse effect on the currency.”
Looking ahead, market participants will watch the Federal Reserve’s September 16 policy decision, the European Central Bank meeting on September 10, and the Bank of Japan’s policy review on September 17‑18, where a 25‑basis‑point hike is widely anticipated.
The personal consumption expenditures price index, the Fed’s preferred inflation gauge, has remained above the 2% target for 65 consecutive months, underscoring persistent price pressures.
Overall, the data reinforced expectations of a near‑term Fed tightening cycle while supporting a firmer dollar and a rally in the yen, highlighting the intertwined dynamics of labour market strength, yield movements, and currency valuations.
