Dollar posts biggest weekly loss as jobs data disappoints

The U.S. dollar is on track for its largest weekly decline in three months, driven by a weaker-than-expected June jobs report that has significantly reduced market expectations for a near-term Federal Reserve interest rate hike. The shift provided a much-needed reprieve for the Japanese yen, which had recently plunged to a 40-year low.

The dollar index, which measures the currency against a basket of peers including the yen and the euro, fell roughly 0.3% on Friday, July 3, extending a weekly loss of about 0.7%. This marks the index's worst weekly performance since early April. The sell-off followed data showing U.S. nonfarm payrolls increased by just 57,000 jobs in June, well below economist forecasts and accompanied by downward revisions for the prior two months.

Traders swiftly pared back bets on Fed tightening. Market-implied probabilities for a September rate hike fell from over 60% before the report to a range between 35% and 45%, according to various data providers. U.S. Treasury yields also retreated, with the interest rate-sensitive two-year note yield dropping after a three-day advance.

The broad dollar weakness lifted other major currencies. The euro climbed to near...