The yen declined slightly to reach 149.10 per dollar, its weakest level since August 16, before paring losses to trade around 148.40

Yen dropped to its lowest level in almost two months and other major currencies too were struggling with losses early on Monday as the dollar extended a rally triggered by Friday’s strong U.S. jobs data and an escalation in the Middle East conflict.

The yen declined slightly to reach 149.10 per dollar, its weakest level since August 16, before paring losses to trade around 148.40. That came on top of a more than 4% drop last week, its biggest weekly percentage decline since early 2009.

The dollar’s gains followed a U.S. jobs report that showed the biggest jump in jobs in six months in September, a drop in the unemployment rate and solid wage rises, all pointing to a resilient economy and forcing markets to reduce pricing for Fed rate cuts.

With rate cuts still being the default position, and when along with upbeat earnings expectations and China going hard on liquidity and fiscal, the equity bull case and the U.S. dollar get a shot in the arm, according to Chris Weston, head of research at Australian online broker Pepperstone.

While geopolitical headlines and the possibility of an energy supply shock remain a continued threat to sentiment, those set long of risk haven’t heard anything significantly market moving through the weekend and head into the new trading week feeling pretty good about the prospect of further upside, he said.

Brent crude oil futures were down 0.4% on Monday, but increased more than 8% last week, the biggest weekly gain since early January 2023.

The dollar index measure against major peers was flat. It gained 0.5% on Friday to a seven-week peak, logging more than 2% gains for the week, its biggest in two years. The euro stayed at $1.0970, down 0.06%.

The yen’s underperformance has also to do with last week’s comments from new prime minister, Shigeru Ishiba, that stoked expectations that rate hikes in Japan are further away.