The U.S. dollar declined on Thursday after June employment data showed that job creation slowed more sharply than economists had expected.
Meanwhile, the Japanese yen strengthened amid speculation that authorities in Tokyo could intervene to support the currency.
Nonfarm Payrolls Miss Market Forecasts
According to the Bureau of Labor Statistics, the U.S. economy added 57,000 nonfarm payrolls in June.
The figure was well below the market forecast of 114,000. It also marked a significant slowdown from May’s downwardly revised increase of 129,000 jobs.
The unemployment rate unexpectedly fell to 4.2% from 4.3% in the previous month.
However, the softer payroll figures raised concerns that momentum in the U.S. labour market is beginning to weaken.
Dollar Index Slides Following Jobs Data
The U.S. Dollar Index, which tracks the greenback against six major currencies, fell approximately 0.75% to around 100.62.
The disappointing employment report reduced some expectations that the Federal Reserve would raise interest rates in the near term.
Lower interest-rate expectations often weaken the dollar because they reduce the potential return from holding U.S.-denominated assets.
Japanese Yen Surges on Intervention Speculation
The Japanese yen rallied sharply against the dollar as traders reacted to reports that Japanese officials may have conducted rate checks.
The yen gained as much as 1%, pushing the USD/JPY exchange rate down to an intraday low of approximately 160.96. The pair later traded near 161.16.
Rate checks occur when central bank officials contact commercial banks to request currency prices. Traders often view such activity as a possible warning ahead of direct foreign-exchange intervention.
However, no central bank officials confirmed that a rate check had taken place. The Bank of Japan also declined to comment.
Traders Reduce Long-Dollar Positions
Daniela Hathorn, senior market analyst at Capital.com, said the dollar’s decline did not resemble the sudden and disorderly moves normally associated with official intervention.
Instead, traders appeared to be reducing long-dollar positions after USD/JPY had become increasingly stretched.
Market participants also remained cautious because of uncertainty surrounding U.S. employment data and Federal Reserve policy.
Japan Remains Concerned About Yen Weakness
Japanese officials have repeatedly warned that they are prepared to respond to excessive or speculative moves in the currency market.
The yen has remained close to its weakest levels in around 40 years, increasing pressure on the government and the Bank of Japan.
Japan previously spent tens of billions of dollars intervening in currency markets during late April and early May. However, those measures provided only temporary support.
A recent Bank of Japan interest-rate increase also failed to reverse the yen’s longer-term decline.
Reports suggest that Japanese authorities could now pursue a more targeted strategy against speculative currency positions.
Hawkish Federal Reserve Comments Support Dollar
Despite Thursday’s decline, the dollar continued to receive some support from hawkish comments by Federal Reserve Chair Kevin Warsh.
Speaking at the European Central Bank’s forum in Sintra, Portugal, Warsh stressed the Fed’s commitment to its 2% inflation target.
He also warned that investors expecting a rapid shift toward looser monetary policy could be disappointed.
Warsh defended the Federal Reserve’s independence from President Donald Trump, who has repeatedly called for lower interest rates.
Persistent inflation pressures linked to energy prices and semiconductor costs have strengthened expectations that the Fed could still raise interest rates later this year.
Euro and British Pound Edge Higher
European currencies recorded modest gains as the dollar weakened.
The euro rose approximately 0.1%, while the British pound gained nearly 0.2% and reached a two-week high.
The gains were relatively limited as investors continued to assess the outlook for U.S. monetary policy and global economic growth.
Australian Dollar Remains Under Pressure
The Australian dollar remained close to a three-month low after Australia reported its largest trade deficit in 11 years.
The unexpected deficit was mainly caused by a sharp decline in gold and iron ore exports.
Weakening global commodity demand, prolonged high interest rates and geopolitical uncertainty in the Middle East also weighed on the Australian currency.
