The US dollar is on track to record its largest weekly loss in 12 weeks, driven by a disappointing June jobs report that has significantly dampened market expectations for a near-term Federal Reserve interest rate hike.
The greenback’s slide reflects a rapid repricing of policy expectations.
With the labor market showing signs of cooling, traders have scaled back bets on an imminent rate increase, removing a key pillar of support for the currency.
The shift marks a notable reversal from recent sessions where hawkish positioning had bolstered the dollar.
The weak nonfarm payrolls data, which came in well below consensus estimates, signaled a softening labor market that complicates the Fed’s inflation-fighting mandate.
This development has provided relief for foreign currency holders and emerging market assets, which had been under pressure from the prospect of tighter US monetary policy.