Dollar drops

The dollar fell against major currencies including the yen and euro on Friday after US employment unexpectedly declined in July, fueling concerns about the economy’s strength and undermining the case for the Federal Reserve to raise interest rates.

The US economy lost 23,000 jobs in July, the Labor Department said, compared with economists’ expectations for an increase of 80,000 jobs, according to a Reuters poll.

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The US unemployment rate fell to 4.1 percent as the labor participation rate fell to a near a five-and-a-half year low of 61.4 percent.

The dollar weakened against the yen after the report, shedding gains made in recent days in the aftermath of a historic intervention last week between Japanese and US authorities, which had pushed it to a 13-week low.

It was last down 0.57 percent to 157.56 yen but on track for a weekly gain of about 0.10 percent.

The euro was last up 0.39 percent against the dollar at $1.1568.

It is on track for a weekly gain of 0.41 percent against the dollar.

The dollar’s decline reflected the market’s waning expectations for a Fed hike.

Markets now put a 56 percent chance that the Fed will holding rates steady in September, up from 45 percent a day earlier, according to the CME’s FedWatch tool.

“I think no one really expected non-farm payrolls to be negative or that there would be a big downward revision in the June numbers,” said Thierry Wizman, global FX and rates strategist at Macquarie Group.

“I’m inclined to think that the market has shifted the Fed hike into October or December instead of September,” Wizman said.

He added that “anytime you see a print that suggests the US economy is weak or that the labor market is not as strong as otherwise thought, they effectively push out the prospect of a Fed rate hike.”

US Treasury yields fell sharply following the report.