The U.S. dollar fell from two-month highs hit overnight versus its major peers after signs of weakness in the labour market boosted the case for quicker Federal Reserve rate cuts. Despite that, the dollar on Friday remained on track for a second straight weekly advance after surprisingly strong monthly payrolls figures last week prompted traders to take bets for a half-percentage-point cut at the Fed's next policy meeting off the table. The market's interpretation of Thursday's surge in initial jobless claims was complicated by an uptick in the consumer price index (CPI) the same day, which served as a reminder that restrictive monetary policy may be required to bring inflation under control. Bets for a quarter-point Fed rate cut on Nov. 7 increased to 83.3% from 80.3% a day earlier, with the remaining odds for policy to stay steady, according to the CME Group's FedWatch Tool. A week earlier, there was a 32.1% chance of a half-point reduction and 67.9% probability of a quarter-point cut. The two-year U.S. Treasury note yield , which typically moves in step with interest rate expectations, fell on the day, and was down at 3.9531% early on Friday, keeping the dollar under pressure. While the Fed has signaled a shift in its focus towards full employment over price stability, investors had been looking to the CPI print for confirmation that inflation was coming under control. The dollar added 0.06% to 148.68 yen , inching back towards Thursday's high of 149.58 yen, a level previously not seen since Aug. 2. Australia's currency has been buffetted this week by a waxing and waning in stimulus expectations in the nation's biggest trading partner, China. China's finance ministry is scheduled to hold a news conference on fiscal policy on Saturday.