Heading into Friday's close, the greenback appeared set to extend its winning run against the euro to four consecutive weeks, buoyed by persistently elevated US Treasury yields as European sovereign debt came under selling pressure and traders priced in a prolonged period of restrictive monetary policy from the Federal Reserve.

September's US payroll figures came in below analyst forecasts, while the jobless rate ticked up to 4.2%, prompting the dollar to pare back a portion of its earlier advance. Following that release, the 10-year Treasury yield dipped before reversing course, ultimately settling 5.14 basis points higher at 5.285%.

Treasury yields holding close to their highest levels in decades, a cloudier fiscal picture across parts of Europe, and climbing oil prices all continued to lend the dollar a measure of support. Rising crude oil costs led a portion of portfolio managers to pare back their holdings in currencies tied to the world's largest energy-importing economies, among them the euro and the yen.

The euro has now slipped against the dollar for four weeks running, a stretch of consecutive losses that last occurred around mid-May 2025. The currency held a gain of 0.13%, trading at $1.12580, while Dominic Bunning, who oversees G10 foreign exchange strategy at Nomura, characterised the employment figures as striking a balance between continued economic resilience and the absence of meaningful inflationary pressure — a combination he described as a broadly favourable backdrop for the wider economy.

Analysts anticipate the data will prove favourable for risk assets broadly, with high-beta currencies among the likely beneficiaries.

The central bank lifted borrowing costs and indicated that further increases remained on the table following its policy committee's meeting the previous month, with Fed Chair Kevin Warsh affirming the institution's operational independence from political direction — a stance he maintained even as President Donald Trump continued pressing for reduced interest rates. Traders moved to price in additional rate increases in the wake of the announcement.

Figures from CME Group's FedWatch tool placed the odds of the Fed holding borrowing costs steady later this month at 86%, up from just 36% a week earlier.

Against the Swiss franc, the dollar edged down by 0.30%, settling at a rate of 0.8285. Against the Japanese yen, the rate edged lower by 0.15% to settle at 157.81, while still holding course for a third consecutive weekly gain. Tracking the dollar against a currency basket that includes the yen and euro, the index edged lower by 0.1%, settling at 101.88, with a third consecutive weekly advance appearing within reach.

European nations reached a decision on Friday to tap into diesel reserves. Trump applied pressure on governments to release more oil supplies, aiming to bring down fuel costs that had risen amid the conflict with Iran.

Prices across the euro zone are forecast to climb over the next several months, a trajectory that would sustain upward pressure on the European Central Bank to continue tightening borrowing costs. Sovereign debt from France and Italy has faced sustained downward price pressure over recent weeks, driven by market expectations of tighter monetary policy and an uptick in political uncertainty tied to elections scheduled for 2027, with the yield on French 10-year government bonds reaching a level on Thursday not seen since 2002.

On Friday, the gap between French and German 10-year government bond yields climbed past 150 basis points — a level not recorded since late 2011 — as mounting uncertainty over France's fiscal position and unsettled political conditions weighed on investor sentiment.

Trading at 0.9327, the euro gave up 0.15% of its value relative to the Swiss franc, while holding steady at 177.67 against the Japanese yen. Heading into the weekly close, the euro was on course to lose ground against both the Swiss franc and the Japanese yen — a trajectory that one market observer attributed partly to EUR/CHF's ability to absorb pressure tied to French political uncertainty before a steeper retreat took hold over the past several days. According to an investor note from Bank of America analysts, the skew premium within risk reversals had stretched toward levels not commonly seen in the historical record.