On Friday, the dollar stayed close to a one-week high compared to other major currencies. This came after the largest decrease in U.S. jobless claims in nearly a year, which eased worries about a possible economic downturn.

The U.S. dollar was steady against the Japanese yen following a three-day rebound, supported by a spike in Treasury yields. 

Thursday’s firmer-than-expected employment data spurred a pairing-back in bets on Federal Reserve interest rate cuts this year. The yen and fellow safe-haven Swiss franc hung near one-week lows as Asian and European stock markets rose, while riskier currencies such as the Australian dollar and sterling edged up. 

UBS FX strategist Yvan Berthoux said that the prospect of having a pure risk-on environment, pro carry for F.X., for the second half of this year is much less interesting, given that the forecasts are more conservative on the dollar/yen and the euro/Swiss. 

Data on Thursday showed the number of Americans filing new applications for unemployment benefits fell more than expected last week, calming fears the labour market was unravelling and reinforcing that a gradual softening remains intact. 

The odds of the Fed cutting interest rates by 50 basis points at its next policy meeting on Sept. 17-18 fell to 54%, from 69% a day earlier, with a 25-basis point cut now seen as having a 46% probability, according to the CME Group’s FedWatch Tool.

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