Dollar Regains Ground but Still Set for Weekly Loss

The U.S. dollar inched higher on Friday, with the dollar index up 0.1% to 97.66, though it remains on track for a second straight weekly decline. Markets continue to weigh labor market cracks against sticky inflation, keeping focus firmly on the Federal Reserve’s rate decision next week.

Labor Market and Inflation Data

Thursday’s report showed the sharpest rise in weekly jobless claims in four years, overshadowing August inflation data, which posted the fastest pace in seven months but stayed broadly in line with forecasts. Investors see the Fed as almost certain to cut rates by 25 basis points on September 17, though bets on a larger 50 bps move have faded.

Global Currency Moves

• The euro held at $1.1727 after the ECB left rates unchanged at 2%, with President Christine Lagarde signaling balanced risks ahead. Fitch Ratings is expected to deliver its verdict on French public finances later today.

• The dollar strengthened 0.4% against the yen to 147.76 after a joint U.S.-Japan statement reaffirmed that exchange rates should remain market-driven and free from disorderly moves.

• Sterling slipped 0.2% to $1.3545 after UK data showed the economy stagnated in July.

• The offshore yuan eased to 7.1219 per dollar, while the Australian dollar edged lower to $0.665, still near a 10-month high.

Bond Market

U.S. 10-year Treasury yields rose slightly to 4.0338%, bouncing from near the 4% threshold last tested in April, as traders recalibrated expectations for the Fed’s easing path into year-end.