The U.S. dollar fell on Friday after weaker-than-expected U.S. jobs data dampened expectations for another interest-rate rise by the Federal Reserve later this month.

This gave an extra boost to an already buoyant Swiss franc as investors sought safety due to French fiscal concerns, which lifted French 10-year government bond yields to their highest since 2002 and caused the gap between them and their German equivalents to surge.

U.S. nonfarm payrolls rose just 29,000 and the unemployment rate increased to 4.2% in September, the Bureau of Labor Statistics said Friday. Economists in a WSJ survey had expected an 84,000 increase in payrolls and the jobless rate to remain at 4.1%.

"The report is likely to reignite the debate over whether the labor market is strong enough to absorb further policy tightening after the Fed's recent rate increase [in September]," said Daniele Antonucci, head of investment and chief strategist at Quintet Private Bank, in a note.

The DXY dollar index, which measures the dollar against a basket of currencies, fell to an intraday low of 101.714, comfortably below Thursday's near 18-month high of 102.207. Against the Swiss franc, the dollar dropped to a nine-day low of 0.8225 francs, reversing the previous day's move--when it reached a 16-month high of 0.8382, according to LSEG data.

The market priced the probability of a 25 basis-point rate increase on Oct. 28 at just 17% after the jobs data, down from 23% beforehand and over 70% earlier in the week, LSEG data showed. Fewer than three rises were priced by the end of next year, compared to nearly four earlier this week.

The Swiss franc gained particularly against the euro amid concerns about France, hitting a 10-week high of 0.9258 per euro.

Investors were unimpressed after France's government proposed a 2027 budget containing 43 billion euros in cuts and cost savings on Thursday. French fiscal concerns drew demand for the franc due to Switzerland's low debt and interest-rate levels.

"Switzerland has a functioning debt brake, meaning its public debt is in no way comparable to that of other industrialised nations," Commerzbank foreign exchange analyst Michael Pfister said in a note.

"We had repeatedly emphasised that as the year drew to a close, the high deficits were likely to come back into focus, with the Swiss franc set to benefit," he said.

The spread between French and German 10-year government bond yields hit its highest since November 2011 at 158.67 basis points on Friday, according to LSEG.

The recent selloff in French bonds also raised questions over expectations for the European Central Bank to raise rates further, adding support to the franc and weakening the euro.

"The central bank must be worried about the contagion of the French [bond] selloff into the likes of Italy and even Spain," ING's global head of markets, Chris Turner, said in a note.

"The French debt selloff, the rise in volatility and, most importantly, the softening of interest rates all conspired to send the Swiss franc a lot higher."

If the market prices ECB rates lower, the euro could drop further towards 0.9250 francs, he said.

Unlike the ECB and Fed, the Swiss National Bank has kept interest rates unchanged at 0% and showed little appetite for raising rates even as the Middle East conflict has sent oil prices surging. The reduction in U.S. rate-rise expectations therefore proved a welcome reprieve for the franc.

Ahead of the U.S. jobs data, markets had already trimmed expectations for further U.S. interest-rate increases after Federal Reserve governor Philip Jefferson said at an event in Virginia Thursday that the central bank might need more time to assess the economy's direction before making further policy adjustments.

His comments followed similar remarks from New York Fed President John Williams earlier this week that indicated the Fed might wait until at least December to raise rates and caused the dollar to fall.

The jobs data support the case for the Federal Reserve to keep interest rates on hold in October, Commerzbank senior economist Bernd Weidensteiner said in a note.

"We feel vindicated in our forecast that the Fed will raise rates again only in December," he said.