Dollar Climbs Higher on Strong Jobs Data

The greenback jumped Friday. Traders pushed the currency up after digesting solid employment numbers that pretty much sealed expectations for more Fed rate hikes ahead. Treasury yields climbed alongside the dollar’s rise.

The dollar index gained 0.3% against six major currencies, marking four straight days of advances. February’s jobs report beat forecasts by a wide margin, adding 311,000 positions when economists expected around 225,000. Unemployment held steady at 3.6%, near historic lows. Weekly jobless claims also dropped more than anticipated. Fed watchers now see these numbers as ammunition for policymakers who want to keep fighting inflation with higher borrowing costs.

Markets aren’t buying any dovish pivot yet.

The euro slipped 0.2% to $1.0905 as the dollar’s strength weighed on the single currency. European Central Bank officials keep hinting they might pause rate increases soon, creating a policy divergence with the Fed. ECB President Christine Lagarde said Thursday that the bank would assess incoming data carefully before deciding on March moves. German inflation cooled to 8.7% in February, down from 9.2% the prior month. But core prices stayed sticky at 5.2%, giving policymakers reason to stay cautious about declaring victory over price pressures.

Sterling managed a small gain to $1.2230 despite the dollar’s broad rally. Bank of England Governor Andrew Bailey faces a tricky balancing act with UK inflation still running above 10%. Markets expect another quarter-point hike at the March meeting, though some traders bet the BoE might go bigger if price pressures don’t ease. Britain’s economy has shown surprising resilience, but mortgage rates keep climbing and housing activity is slowing fast.

China’s yuan hit fresh six-month lows near 6.95 per dollar. The People’s Bank of China set its daily reference rate weaker again, allowing more depreciation as Beijing focuses on supporting growth over currency stability. Manufacturing data showed continued weakness in February, with the official PMI barely above the 50 threshold that separates expansion from contraction. Property sales in major cities fell 15% year-over-year last month.

The yen traded around 130.50 per dollar.

Bank of Japan Governor Haruhiko Kuroda keeps defending ultra-loose policy even as other central banks tighten aggressively. His successor, Kazuo Ueda, takes over next month and faces immediate pressure to shift course. Japanese 10-year bond yields hit 0.48% Friday, approaching the BoJ’s unofficial ceiling of 0.5%. Currency intervention remains possible if the yen weakens much further, though officials haven’t drawn any clear lines in the sand.

The Swiss franc held steady at 0.9150 per dollar while the Australian dollar dropped 0.4% to $0.6675. Commodity prices fell across the board, hurting resource-linked currencies like the Aussie and Canadian dollar. Iron ore futures in China declined 3% as steel demand remained weak. Oil prices also retreated, with Brent crude falling below $83 per barrel on concerns about Chinese consumption and potential recession risks.

Canada’s loonie stayed flat around 1.3500 per greenback. Bank of Canada Governor Tiff Macklem said Wednesday that inflation remains too high but the central bank wants to see how previous rate hikes work through the economy. Canadian housing starts plunged 22% in February, the biggest drop in over a year. Mortgage rates above 6% are finally cooling the red-hot property market that drove much of the country’s inflation surge.

Turkey’s lira kept sliding to 14.75 against the dollar. President Erdogan’s unorthodox monetary policies continue spooking investors ahead of elections expected in May. The central bank cut rates again last month despite inflation running above 55%. Opposition candidates promise more conventional policies if they win, but markets remain skeptical about Turkey’s economic direction.

India’s rupee weakened to 82.50 per dollar as foreign investors pulled money from local stocks and bonds. The Reserve Bank of India has been intervening to smooth volatility, burning through foreign exchange reserves to defend the currency. Governor Shaktikanta Das warned that global financial conditions could tighten further if developed economies keep raising rates.

Brazil’s real dipped slightly despite solid economic fundamentals. The central bank there has been cutting rates as inflation cools, but external pressures from dollar strength are limiting the currency’s gains.

Next week brings key U.S. inflation data that could move markets significantly. The consumer price index for February comes out Tuesday, with economists expecting headline inflation to slow to 6.0% from 6.4%. Core CPI probably held steady at 5.5%. Fed Chair Jerome Powell speaks Wednesday and Thursday, giving traders fresh clues about the central bank’s thinking. Most officials want to see several months of cooling price pressures before considering any pause in rate hikes.

The Federal Reserve’s aggressive tightening cycle has created ripple effects across emerging markets, with capital flowing back toward dollar-denominated assets. Mexico’s peso dropped 0.6% Friday as investors reassessed carry trade positions. South Africa’s rand also weakened despite the country’s current account surplus, highlighting how Fed policy dominates global currency flows.

February’s jobs data reinforced a troubling pattern for Fed officials: labor market strength that could fuel wage growth and keep inflation elevated. Average hourly earnings rose 4.6% year-over-year, well above the Fed’s comfort zone. Job openings remain near record highs at 10.8 million, giving workers continued bargaining power that complicates the central bank’s inflation fight.