US Dollar is heading for its best weekly performance since July

The dollar exhibited a robust performance on Friday, poised to conclude the week with its most significant gain since July. This surge is attributed to diminishing expectations of an imminent and substantial cut in interest rates for the year, a sentiment prevailing in the market ahead of the eagerly anticipated release of crucial US employment data later in the day.

Thursday’s data underscored the resilience of the US labor market, revealing that private sector employers added more jobs than anticipated in December. This positive jobs report provided a strong foundation for the dollar, enabling it to overcome previous weaknesses. The dollar index, gauging the currency’s strength against a basket of counterparts, reached 102.39 in early Friday trading. The index has notched a remarkable 1 percent gain this week, marking its most robust performance since the week concluding on July 23.

However, the dollar’s resurgence faces a critical evaluation with the imminent release of the non-farm payrolls report later in the session. According to economists surveyed by Reuters, an estimated 170,000 jobs are expected to have been created in December, a slight decline from the 199,000 jobs added in November.

Market dynamics are further reflected in the CME Group’s Fed Watch tool, revealing a reduction in traders’ expectations for interest rate cuts. The current market sentiment suggests a 65 percent probability of a rate cut in March, down from 86 percent the preceding week.

The yen experienced a notable decline this week, depreciating by 2.5 percent against the dollar and is set to record its weakest weekly performance since June. On Friday, the yen slipped by 0.06 percent to 144.72 per dollar, having touched its lowest point in over two weeks at 144.90 earlier in the session.

In recent transactions, the euro witnessed a modest uptick of 0.09 percent, reaching $1.0953. Nevertheless, it is on course to register a weekly decline of 0.8 percent, concluding a three-week streak of gains. The pound sterling, in recent trading, reached $1.2694, reflecting a 0.12 percent increase during the session but still trending towards a slight weekly decline.

Shifting focus to cryptocurrencies, Bitcoin experienced a 0.91 percent decline, settling at $44,082.61, while Ether saw a 0.53 percent drop, reaching $2,263.75.