Thekabarnews.com—The U.S. dollar fell from its highest level in almost 13 months on Friday, July 3, in local time trading. This came as the latest US employment statistics showed a lower-than-expected performance in the market. As a result, investors began to reconsider the prospects of more interest rate hikes by the Federal Reserve (Fed).

The softer labor market report alleviated worries the US central bank might extend monetary policy tightening in the near future.

The euro and a slew of other big currencies climbed against the dollar as prospects faded for more rate hikes.

Despite the fall, trading was rather quiet overall. US financial markets were closed for the Independence Day vacation, which limited liquidity and curbed transaction volumes across global currency markets.

The US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, was down 0.52 percent at 100.86.

The dip added to the dollar’s losses from the previous session. It also represented a change in investor attitude following the latest economic data.

Market participants pay close attention to employment data because it provides important information about the health of the US economy. This data often shapes the Federal Reserve’s choices on monetary policy.

A weaker-than-expected labor market takes pressure off the central bank to aggressively hike rates. This happens because slower job growth can imply fading economic momentum.

Higher rates take the appeal off dollar-denominated assets relative to others that give higher yields. As a result, anticipation that interest rates would be higher tends to weigh on the US dollar.

As the chances of a tougher US monetary policy fade, investors typically shift into other major currencies. Notably, they are moving into euros.

The euro rose on a pullback in the dollar, with other major currencies also firmer as risk appetite improved.

Currency traders continued to digest the latest economic data and what it means for the Fed’s next policy meeting. Meanwhile, markets looked ahead to upcoming inflation and consumer spending data for fresh clues.

Although holiday-related trading conditions contributed to the decrease in market activity, investor focus remained on the changing outlook for US monetary policy.

Upcoming economic releases, especially inflation, employment, and wage growth numbers, are likely to be key. They will help set expectations for the next action by the Fed.

The recent market reaction highlighted the persistent vulnerability of global currency markets to US economic data. Investors continue to search for clearer signs on whether the Fed would keep its present policy stance or delay further interest rate hikes.

The US dollar is likely to remain sensitive to developing expectations about the central bank’s path. This will remain the case until the economy releases further indications.