The euro hit a one-week lows versus the dollar on Friday, deflated after the European Central Bank signalled it wasn't planning another rate rise and as U.S. jobs data did not deliver a big downside surprise.
The ECB raised euro area borrowing costs by a widely anticipated quarter percentage-point to 4.25 percent on Thursday, but President Jean-Claude Trichet avoided any code words associated with more tightening, saying he had no bias.
(For details please double click on) Taken with the U.S. non-farm payrolls report, which was in line with expectations despite speculation about risks to the downside, Trichet's tone helped to knock the euro two U.S. cents off two-month highs.
Several ECB policymakers reiterated Trichet's stance on Friday, including Governing Council member Axel Weber.
A Reuters poll taken after Trichet's speech showed a median 30 percent chance of another ECB rise this year.
"We're in the camp that thinks there won't be any further rate hikes from the ECB this year, so we think we've seen the high of euro/dollar," said Niels Christensen, FX strategist at Nordea in Copenhagen.
The ECB, like other several other central banks, has the twin difficulties of rising inflation and slowing growth, but Christensen said the euro might falter due to the growth scenario.
"We have already seen a lot of indications of weak growth in several countries," he said.
The euro was last flat after dropping to a one-week low of $1.5654 earlier.
The dollar was down against the yen , but hit a one-week high versus a basket of six major currencies at 72.849 .
Bull Run Over?
Some analysts said it may be to early to call the end of the euro's bull run -- even though the single currency zone's soft spot spots are spreading -- as slowing U.S. growth is likely to keep the Federal Reserve from raising rates for a while.
Thursday's ECB increase widened the gap between euro zone and U.S. rates to 225 basis points, giving the euro its biggest yield advantage over the dollar in its 9-1/2 year life.
"We continue to see euro/dollar at around or above current levels in the short term as significant headwinds remain for the dollar and the ECB has not ruled out any possibility at this stage," UBS said in a research note.
"We don't think yesterday's decision was the catalyst needed for a decisive move and the Fed's ability to adopt a more hawkish stance is still under scrutiny." Underscoring the U.S. economy's frailty, data on Thursday showed that U.S. employers cut workers for a sixth straight month in June for the longest such streak since 2002.
Markets though took the release as positive for the dollar as some indicators -- including a private sector jobs report -- had pointed to an even worse figure.
Next week's focus will be the G8 summit and whether the leaders will send a message strong enough to reverse the course of record high oil prices and the dollar's overall slide, analysts said.
G8 leaders will discuss concerns that a weak dollar is a contributing factor to high oil prices when they gather in Hokkaido, northern Japan, on July 7-9, a senior Japanese government official said on Thursday.