The dollar declined following a weak jobs report but still recorded its strongest weekly gain since August.

The U.S. dollar weakened on Friday after a disappointing jobs report increased expectations that the Federal Reserve could cut interest rates. Nevertheless, the currency was still on track for a strong weekly gain, supported by rising demand for safe-haven assets amid escalating tensions in the Middle East.

By 16:30 ET (21:30 GMT), the Dollar Index — which measures the dollar against six major currencies — had fallen 0.4% to 98.89. Despite the decline, it remained poised for a weekly rise of about 1.3%, its strongest performance since August 2025.

Dollar pressured by weak payroll data

Markets focused on the February nonfarm payrolls report released Friday. The data showed the U.S. economy lost 92,000 jobs last month, far below economists’ expectations for a gain of 58,000. At the same time, the unemployment rate increased slightly to 4.4%.

The weak February figure followed a stronger January reading of 126,000 jobs, revised down from 130,000. December’s employment data was also revised lower, shifting from a gain of 48,000 to a loss of 17,000 jobs.

Following the report, traders increased their expectations that the Federal Reserve may cut interest rates. Since higher rates typically support the dollar while lower rates weaken it, the data weighed on the currency.

However, despite Friday’s pullback, the dollar benefited throughout the week from its safe-haven status as geopolitical tensions intensified in the Middle East.

U.S. Defense Secretary Pete Hegseth said Thursday that U.S. firepower directed toward Iran could increase significantly. Meanwhile, Israel announced earlier Friday that it had begun a large-scale wave of strikes targeting infrastructure in Tehran.

Iran retaliated by launching attacks against Israel and several regional countries including Gulf states, Cyprus, Turkey, and Azerbaijan, expanding the scope of the conflict.

Analysts at ING said the dollar is unlikely to resume a sustained decline unless a meaningful political breakthrough leads to a ceasefire. Until then, governments will likely continue grappling with the economic consequences of elevated energy prices. The Dollar Index is now approaching the key psychological level of 100.

According to Trade Nation senior market analyst David Morrison, the 100 level represents an important technical resistance point. The index repeatedly tested this level in November but failed to break through before eventually falling to a four-year low at the end of January.

At that time, some traders speculated the dollar’s decline could continue amid concerns it might eventually lose its role as the world’s primary reserve currency. Morrison said those predictions now appear premature, although the Dollar Index still faces several significant resistance levels.

Euro heads for weekly decline

In Europe, EUR/USD was mostly unchanged at 1.1611, though the euro was on track to lose about 1.7% for the week as higher energy costs weighed on economic growth prospects in the region.

Eurozone GDP data due later in the session is expected to confirm growth of 0.3% in the final quarter of last year and annual expansion of 1.3%.

Earlier data also showed eurozone inflation in February came in higher than expected, even before the outbreak of the Iran conflict.

Despite the geopolitical developments, European Central Bank policymaker and Dutch central bank chief Olaf Sleijpen said the eurozone’s monetary policy environment remains relatively stable.

Speaking in an interview Friday, he noted that while the situation is no longer ideal, he has not significantly changed his overall assessment of the region’s economic position.

Meanwhile, GBP/USD rose 0.3% to 1.3393, although sterling was still on track for a weekly decline of around 0.8% as rising energy prices add further pressure on the U.K. economy and government.

Yen weakens amid rising oil prices

In Asia, USD/JPY increased 0.2% to 157.83 and was on track for a weekly gain of 1.1%. The Japanese yen remained under pressure as higher oil prices raise inflation risks for energy-importing economies such as Japan.

Bank of Japan Deputy Governor Ryozo Himino told parliament that the weaker yen is pushing up import costs and could influence underlying inflation.

USD/CNY rose 0.1% to 6.8965 and was also heading for weekly gains, following a week in which Chinese authorities announced their lowest economic growth target since 1991.

Meanwhile, AUD/USD climbed 0.3% to 0.7026, though the Australian dollar was still set for a weekly loss of about 1.3%, as risk-sensitive currencies remained under pressure.

Sources: Anuron Mitra