US FX WRAP: Dollar flat as US yields help offset earlier weakness; CAD outperforms on stellar jobs report

Analysis details (19:56)

The Dollar Index was flat on Friday, with the delayed September PCE report likely having little impact on the Fed's decision-making at the December meeting. The report was largely in line with expectations (core Y/Y slightly soft), with monthly figures in keeping with H2 25 levels. Separately, UoM Sentiment saw its first increase in five months after hitting its second-lowest level ever in November, helped by a rise in expected personal finances, particularly those of a younger age. DXY hit 98.805 lows before recovering losses amid an extension of the move higher in US yields; newsflow was light at the time.

CAD outperformance was seen on the November jobs report. Job growth surprised on the upside (act. 53.6k vs exp. -5k) with the unemployment rate sinking to 6.5% from 6.9% (exp. 7.0%) alongside a drop in the participation rate to 65.1% from 65.3%. The report resulted in a huge shift in BoC policy expectation, whereby money markets now look for a 25bps hike by the end of 2026 as opposed to the prior view of rates being steady. USD/CAD moved lower to September levels, trading around the lows of 1.3834 from an earlier peak of 1.3960.

JPY was weaker vs USD as the currency appears exhausted by further BoJ hawkish sources, as well as weighed on by higher US yields. This time, Bloomberg reported that the BoJ is likely to hike in December and leave the door open to more, but before it will check data and market moves. JPY had been originally firmer on said themes, extending after verbal intervention from Chief Cabinet Secretary Kihara, leaving USD/JPY hitting lows of 154.35 before moving back above 155.20 over EU & US trade as the Dollar clawed back lost ground.

INR finished weaker vs USD following the RBI decision to cut the Repo Rate by 25bps to 5.25%, as widely expected. The central bank maintained its neutral stance while lowering its FY26 CPI inflation outlook to 2.0% from 2.6%.

BRL was hit on Friday following Former Brazilian President Bolsonaro stating for the first time that he wants to launch his son, Flávio Bolsonaro, in the 2026 election against President Lula, local press reported. The development leaves political uncertainty heightened, with Flávio consolidating party unity and having a significant support base of allied governors like Tarcísio de Freitas (Republicanos) in São Paulo, aiming to clash with President Lula.

05 Dec 2025 - 20:29- ForexUS Research- Source: Newsquawk