Strong US jobs lift dollar to 2-month high, pressuring Bitcoin

US nonfarm payrolls increased by 172,000 in May, a stronger-than-expected reading that coincided with a rally in the US dollar. The US Dollar Index closed above 100 for the first time in two months, reached an intraday high of 100.174 and was trading around 100.016 at the time of reporting.

Traders revised expectations for Federal Reserve policy after the jobs report. Data from CME FedWatch showed markets pricing in more than a 70% probability of a Fed rate increase in December, up from about 45% a week earlier.

A stronger dollar has been associated with reduced demand for higher-risk assets. Investors shifted money toward cash and fixed-income instruments, which offer yield, and away from speculative assets such as cryptocurrencies. Over multi-month periods, moves in the US Dollar Index and Bitcoin have often shown an inverse pattern.

Bitcoin moved sharply during the session, briefly rising about 5% to reclaim the $63,000 level amid geopolitical tensions in the Middle East, then giving back most of those gains. The cryptocurrency was trading near $62,615 when markets were last checked.

Trader Matthew Dixon cautioned, “The inverse relationship isn’t perfect, but over multi-month periods it is quite strong. We are currently at a ‘make or break point on long term DXY which will likely have a serious impact on BTC & ALTs.”

Market attention is focused on the Federal Reserve’s mid-June policy meeting. Nonfarm payrolls are a key indicator used by policymakers to assess labor market health; a stronger jobs report can increase the likelihood that the Fed maintains or raises interest rates to address inflation, a factor that supports the dollar relative to other currencies.