The dollar fell from a seven-week high against the euro on Friday after an eagerly anticipated U.S. jobs report disappointed investors hoping for data that would pave the way for the Federal Reserve to begin unwinding its monetary stimulus this month.
U.S. job growth was less than expected in August and the unemployment rate dropped to a 4 1/2-year low as workers gave up the search for work, which could delay Fed plans to scale back its massive monetary stimulus later this month.
Nonfarm payrolls increased 169,000 last month, the Labor Department said on Friday, adding to signs that third-quarter economic growth may have slowed down. The unemployment rate was 7.3 percent.
The report slammed dollar investors and reversed early trading patterns. The euro was last up 0.5 percent at $1.318 and the dollar was down 1.1 percent against the yen at 99.03 yen.
Sterling rose to its highest in seven and a half months against the euro, bolstered by its gains against the dollar. The euro fell 0.2 percent on the day to 84.3 pence, its lowest since Jan. 24.
Sterling has gained recently on a string of recent firm UK data and by investors bringing forward expectations for when UK interest rates will rise. Against the dollar, sterling rose to a two-week high of $1.5681. It was last at $1.5627, up 0.2 percent.
The dollar index was at 82.13, down 0.6 percent, still not far from a recent seven-week peak of 82.671.
The prospect of the Fed withdrawing some of the flood of cheap dollars, which has benefited emerging markets in recent years, has prompted a round of soul-searching and policy discussions among leading developing nations.
"This NFP number is a major fail for the U.S. administration, said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.
"Today's data, in combination with Syrian uncertainties are likely to keep the U.S. Fed on the sidelines for now," Borthwick said.
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