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(Bloomberg) — The dollar advanced after US jobs data came in stronger than anticipated, signaling further signs of labor market resiliency, and progress in US-Iran peace deal talks stalled.
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The Bloomberg Dollar Spot Index gained 0.1% Friday, the highest since April 8. The gauge is up 0.6% for the week and is on track for its best week in three. Job growth in the US in May topped all forecasts and the unemployment rate held steady even as the rest of the global economy struggles with the elevated energy prices due to conflict in the Middle East. The job results have boosted expectations of a Federal Reserve interest-rate hike.
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“This is a good environment for the dollar rally,” said Noah Buffam, strategist at CIBC Capital Markets. “This print passed a big test for the US exceptionalism thesis, a rebounding economy with inflation having been above target.”
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US nonfarm payrolls increased 172,000 in May after two strong readings, according to Bureau of Labor Statistics data out Friday.
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Traders have fully priced in a quarter-point rate hike before the end of 2026. The view marks a sharp shift in wagers from before the US and Israel attacked Iran in late February, when traders expected a series of rate cuts. Many other central banks across the world are expected to inject more aggressive monetary tightening, which weighs on the greenback.
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Meanwhile, President Donald Trump said on Thursday that ceasefire talks are in the “final” stages, but US and Iran have made little progress in talks over an interim peace deal this week. Both sides are involved in their worst clashes since an April ceasefire began. Oil prices steadied on Friday as traders are wary of the uncertain ceasefire.
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Speculative traders had added to their bullish dollar positions in the week through May 26 — the highest since April 7, according to Commodity Futures Trading Commission data. The CFTC is set to report on traders commitment through June 2 later on Friday.
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Nearly all currencies in the Group of 10 weakened against the dollar after the US labor data. The Japanese yen stayed near 160 per US dollar this week, with intervention concerns gradually building as yen weakness persist.
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“Investors likely have no choice but to chase the dollar higher,” said Yusuke Miyairi, a foreign-exchange strategist at Nomura in London. “Fed hike is not our base case but we can’t rule out that risk, based on the recent data.”
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