Dollar slides against yen, euro after surprise US job losses

The US dollar retreated against major currencies on Friday after data revealed an unexpected decline in American employment for July, stoking concerns about economic momentum and the Federal Reserve's policy path.

The Labor Department reported that the US economy shed 23,000 jobs last month, a sharp reversal from the 80,000 gain economists had forecast. The unemployment rate, however, dipped to 4.1%, while the labour force participation rate slipped to 61.4% — its lowest level in roughly five and a half years.

The greenback gave up recent gains against the Japanese yen, falling 0.52% to 157.62 yen. Those gains had followed a rare joint intervention by Japanese and US authorities last week, which had pushed the currency pair to a 13-week low. The euro, meanwhile, rose 0.31% against the dollar to $1.1559.

Market strategists attributed the dollar's slide directly to the payrolls report. "The big drop that we saw this morning is almost wholly related to the US employment report for July," said Thierry Wizman, global FX and rates strategist at Macquarie Group. He noted that the market now appears to be shifting expectations for a Fed rate hike from September to later in the year, as policymakers weigh a softening labour market.

Treasury yields fell sharply following the data. The two-year note yield, which closely tracks Fed rate expectations, dropped 5.19 basis points to 4.193%, while the benchmark 10-year yield slipped 2.67 basis points to 4.643%.

According to CME's FedWatch tool, traders now see a nearly 56% chance that the Fed holds rates steady in September, up from 45% a day earlier. The dollar index, which measures the currency against a basket of peers, fell 0.46% to 99.49.

Gold, which typically moves inversely to the dollar, climbed 2.28% to $4,336.09 an ounce as the greenback weakened.