The dollar fell to three-week lows on Thursday, as the euro gained on strong German industrial orders, while data showing jobs rose less than expected in June plus nagging concerns about global trade also reined in the greenback's recent rally.
Mazen Issa, senior FX strategist, at TD Securities in New York said U.S. economic prospects remain upbeat compared with the rest of the world, but that advantage could be running its course.
"Early flow data has corroborated a return to U.S. dollar assets, but this could be challenging in the coming months if growth abroad stabilizes and twin deficits becomes topical again," Issa said. "For now, euro/dollar looks poised to test key resistance."
The euro climbed after German industrial orders had a higher-than-expected jump in May following four consecutive monthly drops, as demand from domestic customers and the rest of the euro zone picked up. At the same time, there has been a softening in U.S. trade rhetoric towards European Union carmakers, also helping the euro.
The U.S. ambassador to Germany told German car bosses that President Donald Trump would suspend threats to impose tariffs on cars imported from the EU if the bloc lifted duties on U.S. cars, a German newspaper reported on Wednesday. German carmakers were set to post their biggest daily gain since late March with Daimler, BMW, Volkswagen and Renault leading the broader index higher.
In the United States, there was further pressure on the dollar after data showed private payrolls increased last month, but were lower than forecast, while initial jobless claims rose unexpectedly last week. The dollar trimmed losses after a higher-than-expected U.S. services index.
The dollar index dropped to a three-week low and was last down 0.21 percent at 94.47.
While the dollar has been supported by the perception of the relative strength of U.S. growth and the attraction of its higher Treasury yields, some market players say recent falls in those yields may be undermining the currency.
The euro rallied to a three-weak peak and last changed hands at $1.168 up 0.22 percent. However, a deadline for Washington to impose tariffs on Chinese imports set for July 6, has kept the market rangebound.