The US dollar approached a 15-year low against the yen today and fell against the euro after data showed the United States shed twice as many jobs in July as economists expected, adding to worries about recovery.
While US employers did add 71,000 private sector jobs, that was also less than expectations for a 90,000 gain, and helped push the euro to a three-month high above $1.33. The dollar fell to 85.08 yen, its lowest level since November and near a 15-year trough beneath 85.
The jobs report "is really going to deepen concerns about the health of the labor market, and that increases the odds of the Federal Reserve having to implement fresh stimulus measures to jump start the recovery," said Joe Manimbo, analyst at Travelex Global Business Payments in Washington. "Nothing in there to argue for a firmer dollar."
The data also drove two-year US Treasury yields to the latest in a string of record lows, further undermining the dollar's yield appeal.
Analysts said things don't look likely to get better for the dollar ahead of a Federal Reserve policy meeting on Tuesday. A string of weak US economic data fed speculation this week that the central bank could renew Treasury and mortgage bond purchases to jolt the economy back to health.
"It's just not safe to hold dollars. Quantitative easing is back on the table and it will push yields even lower," said Douglas Borthwick, head trader at Faros Trading in Stamford, Connecticut. "There are very few reasons out there to buy it."
The dollar was down 0.7 per cent at 85.22 yen. It was was near a 15-year low of 84.81 yen and its all-time trough around 79 yen.
For now, traders are disposed to sell yen around the 85 level, said Boris Schlossberg, director of research at GFT Forex in New York. But he said the level will eventually break, "if not today, then early next week, as currency traders price in declining yields in the US bond market".
A dip below 85 yen could increase volatility and push Japanese officials to talk try to talk down the yen.
Several lawmakers have warned that action may be warranted to weaken the yen and restore Japanese trade competitiveness, though analysts think it would take an extremely rapid rise to trigger outright intervention.
The euro rose 0.9 per cent to $1.3320, its highest level since May, according to Reuters data. A close above $1.3125, the 38.2 per cent retracement of the euro's November-to-June slide, looks like and, strategists said, would be a bullish sign pointing to more euro gains.
Sterling rose 0.6 per cent to $1.5999, its best showing against the greenback since February. Traders said the $1.5910 was now seen as support should the pound retreat.
Reuters