The U.S. dollar weakened against most currencies on Friday, hitting nearly two week lows versus the euro, as weaker-than-expected jobs data raised concerns that the pace of recovery in the American labor market has slowed down.
The poor U.S. jobs report along with downbeat economic indicators in the manufacturing and service sectors earlier this week should ensure that the Federal Reserve's quantitative easing policy will be in place for some time, analysts said.
"The market is assured that the Fed will not be taking its foot off the QE gas pedal anytime soon," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.
"This number is seeing follow-through in dollar weakness and I expect that to continue against all countries who are not embarking on QE of their own."
Labor Department data showed that the U.S. economy added just 88,000 non-farm jobs last month, well below the consensus forecasts for a gain of 200,000.
The unemployment rate did inch lower to 7.6 percent from 7.7 percent the previous month, while January and February readings were revised upwards to show that 61,000 more jobs were added.
The euro rose as high as $1.3026, its strongest level since March 25. It was last at $1.2999, up 0.5 percent.
"The 61,000 additional jobs were not sufficient offsets," said Marc Chandler, global head of foreign exchange strategy at Brown Brothers Harriman in New York.
"Investors have also become more immune to the divergence with the unemployment rate. The unemployment rate ticked down...as almost 500,000 people left the labor market."
Against the yen, the dollar last traded up 0.4 percent at 96.70 after earlier hitting session lows at 95.80 yen following the U.S. jobs report.
Analysts said the main driver for the dollar's moves against the yen is still the Bank of Japan's mammoth monetary stimulus announced on Thursday which may further undermine the Japanese currency.
"Investors' mindset in trading dollar/yen is to buy it on dips," said Brian Dangerfield, currency strategist, at RBS Securities in Stamford, Connecticut. "We know that dollar/yen will continue to strengthen given what's going on in Japan and the U.S. payrolls report gave the market the opportunity to buy it back at a lower level."
The dollar had extended Thursday's gains in Asian trading to hit a peak of 97.19 yen, a level not seen since August 2009. Overall, the greenback was still up 11.5 percent against the yen so far this year, with Thursday's BoJ decision causing the biggest one-day fall in the Japanese currency since late 2008.
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