Greenback drops as weak US jobs data pushes out Fed hike expectations
Published Sun, Aug 9, 2026 · 04:24 PM
[NEW YORK] The greenback fell against major currencies including the yen and euro on Friday (Aug 7) after US employment unexpectedly declined in July, fuelling concerns about the economy’s strength and undermining the case for the Federal Reserve to raise interest rates.
The US economy lost 23,000 jobs in July, the Labor Department said, compared with economists’ expectations for an increase of 80,000 jobs, according to a Reuters poll. The US unemployment rate fell to 4.1 per cent as the labour participation rate fell to a near five-and-a-half-year low of 61.4 per cent.
The US dollar weakened against the yen after the report, shedding gains made in recent days in the aftermath of a historic intervention on Jul 30 and 31 between Japanese and American authorities, which had pushed it to a 13-week low last week.
It was last down 0.57 per cent to 157.56 yen, but on track for a weekly gain of about 0.1 per cent last week.
The euro was last up 0.39 per cent against the dollar at US$1.1568. It was on track last week for a weekly gain of 0.41 per cent against the dollar.
The dollar’s decline reflected the market’s waning expectations for a Fed hike. Markets now put a 56 per cent chance that the Fed will holding rates steady in September, up from 45 per cent a day earlier, according to the CME’s FedWatch tool.
“I think no one really expected non-farm payrolls to be negative or that there would be a big downward revision in the June numbers,” said Thierry Wizman, global FX and rates strategist at Macquarie Group.
“I’m inclined to think that the market has shifted the Fed hike into October or December instead of September, Wizman said, adding that “anytime you see a print that suggests the US economy is weak or that the labour market is not as strong as otherwise thought, they effectively push out the prospect of a Fed rate hike”.
US Treasury yields fell sharply following the report. The two-year note yield, which typically moves in step with Fed rate expectations, fell 4.2 basis points (bps) to 4.245 per cent. The yield on benchmark US 10-year notes fell 2 bps to 4.649 per cent.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.44 per cent to 99.50. It was set to a weekly loss of 0.31 per cent last week, making the second consecutive week of declines.
Gold rose as the dollar fell. Spot gold rose 2.6 per cent to US$4,347.29 an ounce. REUTERS
