Dollar Dips: Jobs Report Eases Fed Rate Hike Fears, Yen Gains Strength

The U.S. dollar faced its largest weekly loss in three months following a lackluster jobs report that tempered expectations for an imminent Federal Reserve interest rate hike. This downturn provided some relief to the Japanese yen, which had struggled due to market volatility and intervention threats.

The U.S. dollar is on track to record its most significant weekly decline in 12 weeks, as a moderate U.S. jobs report has dampened market anticipation for an immediate Federal Reserve interest rate increase, boosting the beleaguered Japanese yen.

Weakened by the broader dollar, the euro climbed to nearly a two-week high at $1.1446, improving by 0.5% this week, while the pound sterling rose to $1.3355, marking its best performance in nearly three months with a 1.1% weekly gain. The yen also benefitted, strengthening to under 161 per dollar. Still, market sentiment remained jittery due to potential intervention risks after a sudden rise Thursday lifted it from a historic low of 162.84.

Following reports of slackening U.S. job growth in June and revised lower payroll gains for the previous two months, the dollar's value declined as traders scaled back their bets on an imminent rate hike, now gauging a 45% likelihood for a September hike based on the CME FedWatch tool. Concurrently, U.S. Treasury yields recoiled, with the 2-year notes experiencing a 4 basis-point drop, breaking a three-day streak of gains.