The dollar fell against most of its rivals on Friday after US employment data disappointed investors looking for signs of a strengthening economy.
Monthly non-farm payrolls data showed that just 138,000 jobs were created in May, down from 174,000 in April – which was a significant downward revision – and missing expectations of 185,000.
Unemployment rate falls
The unemployment rate, however, surprisingly dipped further to a 16-year low of 4.3%, from 4.4% in April.
Wage growth was weaker than expected, with average hourly earnings unchanged from April's figure of 2.5%, defying forecasts of a rise to 2.6%.
Markets reacted with losses, although the main stock indexes held their ground, on rising expectations that the Federal Reserve will hold back from further rate hikes following the widely-anticipated quarter-point rate increase this month.
The dollar fell 0.6% against the euro to $1.1276, and lost 0.8 per cent to Y110.48 versus Japan's yen.
“High expectations – both for this jobs report and for a June rate hike – had been priced into the dollar this week, so there was only one way it could have moved in response to the jobs data – and that was down," said David Lamb at FEXCO Corporate Payments.
The dollar index, a measure of the US currency's relative strength versus a basket of its chief rivals, fell to its lowest level since Donald Trump was elected president, down 0.5% at 96.7.
The US currency managed a 0.2% gain against the pound, however, as election jitters hit UK markets.
Stocks hold their ground
Meanwhile, US stock investors were more focused on hopes of a temporary end to the current rate-hike cycle than the threat of economic weakness, and this kept a lid on any losses.
The S&P 500 index was flat at 2,430, while the Dow Jones Industrial Average was also little changed at 21,136.
"Sentiment towards the US economy and dollar have clearly taken a hit from May’s jobs report with expectations of the Fed raising rates beyond June potentially diminishing," said Lukman Otunuga at FXTM.
David Lamb added: "While a June rate hike remains a safe bet, the Fed’s plan to crank up rates repeatedly later this year now looks far from assured."