The greenback eased against a basket of currencies on Friday (Oct 6) as investors assessed a jobs report that showed US hiring rose broadly in September, but also that wage growth was slowing.

The US dollar index, which measures the currency’s strength against a basket of six rivals, was down 0.31 per cent to 106.03.

The index rose as high as 106.98 earlier in the session, after data showed US non-farm payrolls increased by 336,000 jobs last month. The numbers for August were revised higher to show 227,000 jobs added instead of the previously reported 187,000. Economists polled by Reuters had forecast September payrolls rising by 170,000 jobs.

“This morning’s data pushed expectations for the first rate cuts further into late 2024, but failed to convince market participants of another hike this year, meaning that short-term yields – which play a dominant role in driving foreign exchange moves – remained relatively stable,” said, Karl Schamotta, chief market strategist at Corpay in Toronto.

Post-payrolls, US rate futures priced in a 42 per cent chance of a rate increase by the end of the year, up from about 33 per cent on Thursday, according to the CME FedWatch tool.

The greenback’s recent strength has been underpinned by a rapid sell-off in US government bonds, which sent yields to multi-year highs.

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While benchmark 10-year notes reached 4.887 per cent and 30-year yields hit 5.053 per cent – both the highest since 2007 – two-year notes rose as high as 5.151 per cent, holding below the 5.202 per cent level hit on Sep 21.

The payrolls data showed monthly wage growth remained moderate, with average hourly earnings rising 0.2 per cent after a similar gain in August. In the 12 months through September, wages increased 4.2 per cent after advancing 4.3 per cent in August.

“When we go through the report today, average hourly earnings are probably soft enough that the Fed doesn’t need to hike, but we’ll see what happens with inflation, I think it still keeps that on the table,” said Tony Welch, chief investment officer at SignatureFD in Atlanta.

For the week, the US dollar index was down 0.1 per cent, set to snap an 11-week streak of gains that has helped it advance about 6 per cent.

“(It’s) a small bit of profit-taking,” Helen Given, FX trader at Monex USA, said of the US dollar’s reversal on Friday.

Attention now turns to next week’s US inflation data that could offer clues to Fed action.

“If next week’s US consumer price data pushes yields even higher, we should see safe-haven flows beginning to add to rate differentials in supporting the greenback,” said Corpay’s Schamotta.

Against the yen, the US dollar was 0.54 per cent higher at 149.31 yen, hovering close to the 150 mark that traders have been on watch for weeks for a possible intervention by Japanese officials, to combat a sustained depreciation in the yen.

The pound was up 0.43 per cent at US$1.22445, set to close the week on an upbeat note, a positive sign that backed the idea of a larger rebound for the British currency. Reuters