Dollar pauses rally as markets brace for US nonfarm payrolls test

The dollar dipped on Friday but traders were largely keeping to the sidelines in both the currency and U.S. Treasury markets as they looked to U.S. nonfarm payrolls data later in the day for potential catalysts.

Friday's closely-watched jobs report comes on the heels of a run of resilient U.S. economic data which has reinforced the Federal Reserve's hawkish messaging of higher-for-longer rates and sent the greenback and U.S. Treasury yields surging.

The dollar index DXY, which earlier in the week hit a roughly 11-month high of 107.34, last settled at 106.37, but remained on track for 12 straight weeks of gains.

"There's an element here of just taking stock ahead of what should be a very important data release," said Rodrigo Catril, senior FX strategist at National Australia Bank.

"We've got to be mindful that at the moment, U.S. Treasury yields and the dollar, in particular, have been very reactive to positive data releases coming from the U.S., and therefore there's potential for fireworks tonight."

A broad selloff in world government bonds also stabilised on Friday, with the 30-year U.S. Treasury yield (US30YT=RR) last at 4.900%, after spiking above 5% for the first time since 2007 earlier in the week.