The U.S. dollar declined on Friday despite a surge in oil prices, as U.S. employers unexpectedly cut jobs in February. The dollar index recorded its largest weekly advance since November 2024 this week, while the Canadian dollar strengthened, posting the biggest gain among developed-nation currencies.
The dollar index edged down less than 0.1% on Friday, narrowing its weekly increase to 1.34%. The unexpected reduction in U.S. payrolls for February and a rise in the unemployment rate raised concerns about the health of the labor market.
"The relatively muted reaction in the dollar reflects the prevailing view that ongoing conflicts, along with weather and strike impacts on the jobs data, are well understood by economists," said Marc Chandler, Chief Market Strategist at Bannockburn Global.
Options traders are highly optimistic about the dollar's near-term prospects, with the one-week risk reversal indicator showing the strongest expectation for further dollar appreciation in over three years.
The USD/CAD pair fell 0.8% to 1.3573 on Friday. The Canadian dollar has strengthened for two consecutive weeks, making it the only G10 currency to gain against the dollar so far in March, though traders do not expect this trend to persist.
The EUR/USD pair held steady at 1.1613, down 1.7% from the previous Friday, marking its worst weekly performance since October 2024.
Money markets are now pricing in a 100% chance of a European Central Bank interest rate hike this year, a sharp reversal from a week ago when expectations leaned more toward a rate cut.
The USD/JPY pair rose 0.15% to 157.82, marking its fourth weekly gain.
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