The dollar steadied today, as markets reflected on Friday's surprisingly weak US jobs report, which eroded expectations for US interest rate hikes and triggered a dollar selloff.
Today's price action paled in comparison with Friday's - a sell-off that resulted in the dollar's biggest one-day loss in two years against an index of major currencies.
After the jobs report, most in the market still expect the Federal Reserve to raise interest rates for the second time in six weeks at its policy meeting tomorrow, but are now less confident of a further rate rise in September.
"The market remains in a state of shock after Friday's nonfarm payrolls," said Mr Michael Woolfolk, senior currency strategist at Bank of New York. "We have one eye on Fed Chairman Alan (Greenspan) and what me may say after tomorrow's decision."
News that the US economy generated only 32,000 new jobs in July -- less than one-seventh of what the market expected -- raised doubts over the sustainability of the US recovery and sent the dollar 2 cents lower against the euro in a matter of minutes.
The Federal Reserve raised interest rates for the first time in four years at the end of June and signalled the quarter-point hike to 1.25 per cent would be the start of a "measured" campaign to return borrowing costs to more normal levels.
"They're going to hike tomorrow," said Tim Mazanec, director of foreign exchange, Investors Bank & Trust Co. in Boston. "And the market consensus is that tomorrow could be it."
In midmorning New York trade, the euro was down 0.16 per cent at $1.2254 after soaring to a two-week high on Friday. The dollar was nearly flat at 110.58 yen. The dollar gained 0.3 per cent to 1.2545 Swiss francs. Sterling was trading nearly flat at $1.8403.
Today's economic data calendar was light. US wholesale inventories rose more than expected in June by 1.1 per cent.
Sales by wholesalers were flat.