By Hannah Lang and Kevin Buckland
NEW YORK/TOKYO (Reuters) – The dollar lost its one-week high against other major currencies on Friday, ending a turbulent few days in which traders digested a decline in U.S. unemployment and the prospect of a looming economic slowdown.
The U.S. currency fell against the Japanese yen after a three-day recovery as Thursday’s better-than-expected employment data eased speculation about a Federal Reserve rate cut later this year.
The yen and the Swiss franc – another safe-haven currency – remained near their weekly lows, while major stock markets rose and government bond yields fell.
The markets have had a chaotic week, triggered largely by last week’s surprisingly weak US labor market figures, which led to losses in stock markets worldwide. At the same time, demand for safe assets such as the yen and franc drove these currencies to their highest levels since the beginning of the year on Monday.
The dollar was last trading 0.56 percent lower at 146.425 yen, on track for its first weekly increase in six weeks.
“There was a great desire in the market to finally use the yen as a safe haven in the face of chaos and conflict around the world,” said Juan Perez, trading director at Monex USA in Washington.
The dollar index, which measures the currency against six other currencies, fell 0.203 percent to 103.07 after three days of gains.
Against the Swiss franc, it fell by 0.33 percent to 0.8639 francs, but is still on track for a weekly increase.
“The prospect of a pure risk-on carry environment for FX trading in the second half of the year is far less interesting, as our forecasts for the dollar/yen and the euro/Swiss franc are more conservative,” said UBS FX strategist Yvan Berthoux.
“We do not expect an even larger liquidation. In this environment, the decline was quite significant.”
Data on Thursday showed that the number of Americans filing new claims for unemployment benefits last week fell more than expected, easing fears that the labor market was going off the rails and reinforcing that a gradual slowdown is in sight.
The probability that the Fed will cut interest rates by 50 basis points at its next meeting on September 17 and 18 has fallen to 55 percent from 69 percent the day before. A cut of 25 basis points is now given a probability of 46 percent, according to the CME Group’s FedWatch tool.
Settlement of short yen rate completed?
The yen has risen sharply this month, reaching 141.675 against the dollar on Monday, its highest since January 2, as short positions began to unwind following a surprise interest rate hike by the Bank of Japan amid weak US economic indicators.
Figures from the U.S. Commodity Futures Trading Commission later on Friday will provide a clearer indication of the extent of yen purchases.
The euro was slightly higher at $1.09245, but there was little change from the previous week. On Monday it rose to $1.1009 for the first time since January 2.
The pound rose to $1.2755 after rising 0.5 percent overnight, breaking its low of more than a month.
The Aussie slipped 0.12 percent to $0.6584, while the New Zealand dollar hit a three-week high of $0.6035 before retreating to close at $0.6019.
Among cryptocurrencies, the Bitcoin price recently rose by 0.54 percent to $59,844.52, after rising to over $60,000 the previous day.
(Reporting by Hannah Lang in New York and Kevin Buckland in Tokyo; additional reporting by Sruthi Shankar in Bengaluru; Editing by Muralikumar Anantharaman, Miral Fahmy and Jonathan Oatis)
