The US dollar is reportedly headed for its biggest weekly loss in 12 weeks at the close on Friday. The greenback's fall to 100.77 was directly driven by the publication of a lackluster June labor data report, dampening market expectations for a Federal Reserve (Fed) interest rate hike in the near future.
This negative dollar sentiment acted as a catalyst that provided drastic relief to the Japanese yen (JPY) which had previously been heavily affected. The yen reportedly managed to bounce back from a 40-year low of 162.84, to trade firmer below 161 per dollar following the reduction of dollar buying positions by institutional investors.
Despite the technical recovery, the international foreign exchange market remains on high alert regarding the risk of direct government intervention. These concerns were compounded by Friday's trading session moving amid thin liquidity following the closure of Wall Street capital markets for the US bank holiday.
Japanese Finance Minister Satsuki Katayama, along with Chief Cabinet Secretary Minoru Kihara, issued a warning, stressing that the administration was closely monitoring foreign exchange movements. The administration also confirmed that an official communication chain had been activated with Washington to launch targeted operations to curb market speculation that was weighing on the yen.
The US dollar index's decline weighed on other major currencies, with the euro (EUR) surging to a two-week high of $1.1446. Meanwhile, the pound sterling (GBP) also strengthened daily to $1.3355, recording its biggest weekly gain of 1.1% in almost three months.
