The US Dollar headed for its biggest weekly decline in 12 weeks on Friday after a weaker-than-expected US employment report dampened expectations of a near-term Federal Reserve interest rate increase, offering some relief to the struggling Japanese Yen.
The broad-based weakness in the greenback pushed the Euro close to a two-week high of $1.1472, leaving the single currency up 0.6% for the week. Sterling also strengthened to $1.3380, on track for a weekly gain of 1.2%, its strongest performance in almost three months.
The softer Dollar also provided some relief for the Japanese Yen, allowing it to strengthen back above the 161-per-Dollar level. Even so, investors remained wary of the risk of official intervention after the currency rebounded sharply on Thursday from a 40-year low of 162.84 against the Dollar.
The Dollar came under renewed pressure after US job growth slowed markedly in June and payroll figures for the previous two months were revised lower, reinforcing expectations that the Federal Reserve may have less urgency to raise interest rates in the near term, Reuters reports.
Following the data, traders reduced their expectations for a September rate increase, with markets now assigning around a 35% probability of a hike, down from about 55% before the employment report.
US Treasury yields also retreated, with the yield on the rate-sensitive two-year Treasury note falling four basis points, ending a three-session run of gains.
The Dollar index, which tracks the greenback against a basket of major currencies fell around 0.3% to 100.68 after declining 0.5% in the previous session. The index was on course for a weekly loss of 0.7%, its steepest decline since early April.
Although the Yen has recovered from its 40-year lows, investors remained alert to the possibility of official intervention, particularly during a holiday-thinned trading session with US markets closed for Independence Day.
Japanese authorities stepped up their verbal intervention on Friday, reiterating their readiness to act against excessive currency volatility. Finance Minister Satsuki Katayama said Tokyo remained in close contact with Washington on foreign exchange developments and stood prepared to support the Yen if necessary.
Chief Cabinet Secretary Minoru Kihara also said the government was monitoring currency market movements with a high degree of urgency.