The US dollar fell on Friday on news of weaker-than-expected US job growth last month, suggesting that the pace of economic activity might be easing.
The euro climbed to US$1.2807 at 2100 GMT from US$1.2778 late on Thursday in New York.
The US dollar tumbled to ?113.99 from ?115.10 on Thursday.
Data from the US Labor Department showed that payroll numbers rose by a 121,000 last month, well below the average forecast of 175,000, in what appeared to be further confirmation of cooling US economic growth.
The weak job growth gave traders evidence of an economic deceleration that could ease inflation pressures. This in turn could reduce pressure on the Federal Reserve to raise interest rates which could support the greenback.
But Kathy Lien at Forex Capital Markets said the data on closer inspection were not as weak as the headline suggested. Wage growth was strong, and a separate household survey used by the Labor Department to calculate the unemployment rate was was stronger than the payroll survey.
"Even though the headline non-farm payrolls number came in significantly below expectations, the details of the number and the household survey was not nearly as dollar bearish," Lien said.
"Although today's number signals that job growth is sluggish, the jump in average hourly earnings suggests that wage pressures are still prevalent in the US economy and leaves the door open for another [rate] hike in August," she said.
Divyang Shah, a global strategist at HBOS, said the payroll figure was an important market event but stressed that inflation data were more important at present.
"In the current environment it's the inflation data that has proved to be much more important as it is this that has surprised to the upside," he said.
"Thus while the forex [foreign exchange] market will react to payrolls and probably play on it over next week, the events over the following week will prove more insightful as to the Fed rate outlook," he said.
Expectations of an interest rate hike by the US Federal Reserve next month diminished substantially last week when policymakers at the central bank published a relatively mild statement alongside their decision to lift the key Fed funds rate by a quarter point for the seventeenth consecutive time to 5.25 percent.
"The Fed's forecast is for a moderation in growth and [Friday's] weaker-than-expected payroll gain supports that view," commented Michael Carey, a senior strategist at Calyon.
Elsewhere, the euro continued to make marginal headway in the wake of a strong hint on Thursday that the European Central Bank would raise its core interest rate by a quarter point at a meeting on Aug. 3.
ECB president Jean-Claude Trichet said the central bank would continue to exercise "strong vigilance" with regard to potential inflationary risks in the eurozone as economic recovery gathered pace and oil prices remained high.
In late New York trade, the US dollar stood at 1.2230 Swiss francs from 1.2282 on Thursday.
The pound was being traded at US$1.8505 after US$1.8371 late on Thursday.
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