The US dollar index fluctuated lower during Asian trading hours on Thursday (September 3), currently trading around 99.30, with declining US Treasury yields from multi-year highs putting pressure on the dollar. US ADP employment increased by 38,000 in August (lower than the expected 47,000), the smallest increase since January, and the weaker-than-expected data put pressure on the dollar. Hawkish comments from Federal Reserve Chairman Warsh (reiterating the commitment to the inflation target) provided support for the dollar, and New York Fed President Williams stated that rising yields reflected a strong economy.

Weak ADP data pressured the dollar, and US Treasury yields fell.

The US dollar index weakened on Thursday, falling to around 99.30. The decline in US Treasury yields from multi-year highs directly pressured the dollar. The US August ADP employment report showed only 38,000 new jobs, significantly lower than the market expectation of 47,000, marking the smallest increase since January and indicating a further slowdown in the labor market. Although Fed Chairman Warsh's hawkish comments provided some support for the dollar, and New York Fed President Williams emphasized that the recent rise in yields reflected stronger economic conditions rather than inflation concerns, the weak ADP data still weakened market confidence in aggressive rate hikes. CME data shows that the probability of a September rate hike remains at around 62%. The market's focus has now shifted entirely to Friday's US non-farm payroll data, with expectations of 58,000 new jobs and the unemployment rate remaining at 4.1%. The non-farm payroll result will directly determine the short-term dollar trend and the next adjustment in the Fed's policy expectations.

TD Securities: Better-than-expected non-farm payrolls have limited positive impact on the US dollar.

TD Securities points out that even if Friday's non-farm payroll data exceeds expectations, it will only be a "knee-jerk" boost for the dollar, insufficient to support a decisive rate hike by the Federal Reserve in September. The bank believes that strong employment data alone cannot fully justify the current rate hike; further cross-validation with inflation and growth data is needed for the decision. The Fed sentiment index has slightly declined to 127.44, still above the neutral line, but indicating a cooling of market perception towards a hawkish stance. TD Securities emphasizes that the market is currently awaiting new direction from the non-farm payroll data and developments in the Middle East geopolitical situation. Until then, the dollar index is likely to remain within a range of 99.00-99.80 in the short term. Overall, a single employment data point is unlikely to reverse policy expectations, and the dollar's upside potential remains limited by fundamental uncertainties and yield decline pressures.

US Dollar Index: Weak ADP data and falling US Treasury yields exert short-term downward pressure.

The continued weakness in ADP data (38,000 new jobs, the smallest increase since January) indicates a cooling labor market, creating a delicate tug-of-war with Fed Chairman Warsh's hawkish stance that "there is work to be done if inflation doesn't fall sufficiently"—the market is pricing in a rate hike, but the data isn't strong enough to support it. The US dollar index faces triple pressure in the short term: first, the decline in US Treasury yields from multi-year highs has weakened the dollar's interest rate advantage; second, the weak ADP data has raised concerns that the non-farm payroll data may also fall short of expectations; and third, New York Fed President Williams attributed the rise in yields to a strong economy rather than runaway inflation, suggesting the Fed doesn't need to rush to raise rates due to higher yields. TD Securities believes that a stronger-than-expected non-farm payroll data "is insufficient to support a rate hike," meaning that even if Friday's data is strong, the dollar's rebound may be short-lived and limited. The US dollar index is likely to trade within the 99.00-99.80 range before the non-farm payroll data release. If the data significantly falls short of expectations (e.g., fewer than 30,000 new cases), the US dollar may break below 99.00 and slide further towards 98.50. If the data meets or slightly exceeds expectations (50,000-80,000 new cases), the US dollar may rebound in the short term. However, TD Securities believes that strong data is "insufficient to support an interest rate hike," meaning that resistance above 99.80 is strong and a significant breakthrough is unlikely. If the non-farm payroll data is exceptionally strong (e.g., more than 100,000 new cases), it may reignite expectations of an interest rate hike and push the US dollar towards the 99.80-100.00 range. (US Dollar Index Daily Chart, Source: FX678) At 14:55 Beijing time, the US Dollar Index was at 99.26/27.