The dollar lost ground against the yen and euro on Thursday after U.S. unemployment data failed to reverse a downtrend that followed some of the biggest gains on record for China's yuan.
A rise in overnight borrowing costs in Hong Kong and growth in China's services sector to a 17-month high last month helped put the yuan on pace for the biggest two-day rise for the offshore version of its currency since its inception in 2010.
That in turn triggered a broader round of profit-taking on the dollar, sending it more than 1 percent lower against the yen and as low as $1.0575 per euro before a late-morning recovery in Europe.
U.S. jobless claims fell to a 43-year low last week, but that data was countered by a soft report from payrolls processor ADP showing employment gains were muted in December.
That put the dollar back on its lower trajectory after a brief stall following the release of the jobless claims figure.
"All we're seeing is a continuation of the overnight move, which is dollar weakness," said Chapdelaine Foreign Exchange Managing Director Douglas Borthwick. "Obviously that's also helped by the significant intervention by the Chinese overnight in terms of where they're moving their overnight rates, pushing dollar/yuan lower and a lower dollar/yuan means a lower dollar globally."
Borthwick also said sentiment was growing among investors that the dollar's strength has peaked as many return to markets after the Christmas and New Year holidays.
The dollar was 1 percent lower against the yen, falling to 116.09 yen and edging toward its overnight low of 115.58 yen, which was the lowest since Dec. 14.
The euro rose 1.03 percent against the dollar to $1.0594, the highest since it peaked at nearly $1.07 on Dec. 30.
The dollar index, a measure of the greenback against six world currencies, fell 1.19 percent to 101.48.