The US Dollar Index (DXY) traded near 99.40 in early European hours on Thursday, facing selling pressure as US Treasury yields eased from multi-year highs and the Greenback declined against major currencies such as the Euro, Indian Rupee, and Indonesian Rupiah [1][2][3][4]. The weakness in the US Dollar was attributed to softer-than-expected US private labor data, with ADP reporting that private companies added only 38,000 jobs in August, below the consensus estimate of 47,000 and down from July’s 46,000, marking the smallest gain since January [2][3][4]. This disappointing jobs figure weighed on the Dollar and set a cautious tone ahead of the US Nonfarm Payrolls (NFP) report for August, due Friday, which investors are closely monitoring for clues on the Federal Reserve’s next policy move [1][2][3][4].
In the currency markets, the Euro traded slightly higher against the US Dollar at around 1.1600, holding just above its 20-day EMA and showing a mildly bullish near-term bias, though it underperformed against other peers [1]. The Indian Rupee hit a fresh two-month high against the US Dollar, buoyed by significant foreign exchange inflows through the Reserve Bank of India’s FCNR(B) deposits window and the broader weakness in the Dollar [2]. The Indonesian Rupiah also strengthened, with the USD/IDR pair trading around 17,730, as the US Dollar came under pressure from both the soft US labor data and speculation of potential intervention in the Japanese Yen [3].
Market participants are pricing in a roughly 62% probability of a US rate hike in September, according to the CME FedWatch Tool [4]. However, analysts at TD Securities and other strategists suggest that while a strong NFP print could give the Dollar an initial boost, it is unlikely to be sufficient on its own to justify a September rate hike, with markets remaining data-dependent and awaiting further inflation data [1][4]. Federal Reserve officials, including Chair Kevin Warsh and New York Fed President John Williams, have reiterated the Fed’s commitment to its 2% inflation target, with Williams emphasizing that rising yields reflect a strong economy rather than inflation fears [4].
In India, robust economic data showed 2Q26 real GDP growth of 7.8%, 80 basis points above the RBI’s forecast, with broad-based gains across sectors, which analysts at Societe Generale argue reduces the downside growth cost of additional monetary tightening [2]. In Indonesia, Bank Indonesia’s governor pledged to keep policy responsive amid accelerating inflation and a trade balance that, while improved, remains weaker than 2025 averages [3].
Overall, the market remains cautious ahead of the US NFP release, with the consensus expecting a 58,000 jobs addition and the unemployment rate to hold at 4.1% [4]. The reaction to the data is expected to be asymmetric, with downside surprises likely to have a greater impact on near-term policy expectations than upside surprises [1][4].
CONCLUSION
The US Dollar is under pressure following weaker-than-expected private jobs data, with markets awaiting the key Nonfarm Payrolls report for further direction. While a strong NFP could provide a temporary boost to the Dollar, analysts and strategists suggest it is unlikely to shift the Federal Reserve’s cautious stance without additional supportive inflation data. Currency markets remain sensitive to US labor and inflation signals, with the Euro, Indian Rupee, and Indonesian Rupiah all gaining ground against the Greenback.