The U.S. dollar dipped in Asian trading after an increase in weekly unemployment claims raised the market's expectations that the U.S. federal fund rate was nearing its peak.
The DXY, a tracker of the greenback's performance against six other major currencies, declined to 103.41. It posted more than a 0.7 percent loss in the previous session, the biggest daily decline in weeks. The DXY is on track to lose 0.6 percent this week, its worst weekly performance since mid-March.
The U.S. Department of Labor reported Thursday that the number of people filing new unemployment claims rose to the highest in more than a year and a half last week, even though layoffs likely remained similar to the week before as the data encompassed the Memorial Day holiday.
Analysts said the new data proved that the U.S. labor market had continued to weaken over the past few months.
"We do think that the U.S., like many economies, will go through a shallow recession this year. So that'll show up in payrolls numbers and jobless claims and these sorts of numbers."
Jarrod Kerr, Kiwibank chief economist
Against the greenback, the euro traded flat at $1.0776, hovering around the two-week high of $1.0787 breached in the previous session. The eurozone currency is on track for a 0.6 percent gain this week, breaking its four-week losing streak.
The Canadian dollar traded at C$1.3371 versus the greenback, close to the one-month high of C$1.3321 the currency hit on Wednesday. According to analysts, the Canadian currency rallied due to the Bank of Canada's "surprise" rate increase, which caused investors to revise their earlier estimates for a peak in global interest rates.
Sterling hit a near one-month peak of $1.2564 in the Asian forex market. The Australian dollar also stood close to a one-month high of $0.6711 after the Reserve Bank of Australia hiked its key rate by 25 basis points earlier this week. On the other hand, New Zealand's dollar lost 0.11 percent to trade at $0.6089.
Against the Japanese yen, the U.S. currency hit a one-week low of 138.765. The slide in U.S. Treasury yields influenced the dollar/yen exchange rate, according to analysts. The two-year yield was flat at 4.5261 percent, while the 10-year yield declined by seven basis points to 3.7317 percent.
The Turkish lira maintained its downward trajectory, falling by more than one percent against the U.S. dollar to hit a record low of 23.54. Earlier, Turkish President Tayyip Erdogan appointed Hafize Gaye Erkan, who previously worked as an executive at the U.S.-based First Republic Bank, to head the country's central bank.
Upcoming central bank meetings
The U.S. Federal Reserve, the European Central Bank (ECB) and the Bank of Japan (BoJ) will hold their respective policy meetings next week, with analysts expecting further volatility in financial markets following their policy rate decisions.
Fed fund futures predict more than a 70 percent chance that the U.S. central bank will "skip" a rate hike in its June 13-14 meeting. PGIM Fixed Income principal and global investment strategist Guillermo Felices said a slowing U.S. economy, as proven by recent economic data, "gives the Fed room to pause" its monetary tightening campaign.
Meanwhile, the ECB is expected to increase its key rate by 25 basis points next Thursday. Market experts also predict another rate hike by the eurozone's central bank in July before it holds the key rate steady for the rest of the year.
As for the BoJ, analysts expect the Japanese central bank to maintain its "ultra-dovish" monetary policy in its June 15-16 meeting. They explain that Japan's financial regulators are "wary" of making a policy shift due to the country's experience in battling deflation.