By Gertrude Chavez-Dreyfuss and Amanda Cooper

NEW YORK/LONDON (Reuters) – The yen fell to a fresh 38-year low against the U.S. dollar and a record low against the euro on Wednesday as the Japanese currency continued its downward trend and market participants were on high alert for Japan to intervene to shore up the currency.

On the other hand, the dollar weakened after a series of weaker-than-expected economic data from the United States, which boosted expectations that the Federal Reserve will likely start cutting interest rates later in the year.

The decline came after data showed U.S. private-sector employment rose slightly less than expected in June and initial jobless claims rose, both consistent with a slowdown in labor market activity.

A report showing the U.S. services sector contracted last month also weighed on the dollar.

While the U.S. dollar was on the defensive, the euro remained resilient, helped by persistently high inflation on Tuesday, which suggested the European Central Bank would be in no hurry to cut interest rates again. Sterling was steady ahead of Thursday’s U.K. election.

The yen continued to be in focus ahead of the July 4 holiday in the United States, falling to 161.96 per dollar for the first time since December 1986. The dollar was last down 0.2% at 161.08, after falling to a session low below 161 on feeble U.S. data.

The yen also hit an all-time low of 174.48 against the euro. The euro was last up 0.4% at 174.13 yen

“The Bank of Japan (BOJ) may have to wait for the Federal Reserve to cut interest rates and adopt a policy of ‘benign neglect,’” said Helen Given, a currency trader at Monex USA in Washington.

“US Treasury yields are simply still too high for intervention to be sustainable – we’ll need a catalyst on the US dollar side to bring them down, and that could be the Fed. There have also been rumblings that Japan may need to fund another intervention by selling US Treasuries, so I’ll be watching both sales and yields for any sharp moves,” she added.

Japanese authorities have remained silent on the yen this week, with Finance Minister Shunichi Suzuki commenting only on Tuesday that the moves were being watched closely. He stopped compact of repeating his oft-used warning that the ministry was ready to act.

WEAK DATA ATTACKS THE US DOLLAR

Data released on Wednesday indicate a slowdown in the U.S. economy.

Initial jobless claims in the U.S. rose last week, while the number of people on the jobless rolls rose to a 2-1/2-year high in overdue June. Initial jobless claims rose to a seasonally adjusted 238,000 in the week ending June 29.

The number of people receiving benefits after the first week of aid, a measure of employment, rose to a seasonally adjusted 1.858 million in the week ending June 22, the highest level since overdue November 2021.

Separately on Wednesday, the ADP Employment report showed private payrolls rose by 150,000 jobs in June after rising by 157,000 in May. Economists polled by Reuters had forecast private-sector employment would rise by 160,000.

“Overall, this is negative news for the dollar, suggesting … signs of a reversal in the labor market, which is bringing a rate cut closer,” Alex Kuptsikevich, senior market analyst at FxPro, wrote in emailed comments.

The U.S. dollar, which measures the value of the U.S. currency against the euro, sterling, yen and three other major currencies, fell 0.5% to 105.11. It had fallen to a three-week low earlier in the session.

The euro rose to a three-week high against the dollar, last gaining 0.6% to $1.0805.

Adding pressure on the dollar was a feeble U.S. services report from the Institute for Supply Management. The data showed a reading of 48.8, a four-year low from 53.8 in May. It was the second time this year that the PMI fell below 50, indicating a contraction in the services sector.

After a flurry of U.S. data, U.S. interest rate futures priced in a 74% chance of a rate cut in September, up from 69% overdue Tuesday, according to LSEG calculations. The market also priced in two rate cuts in 2024.

Now attention turns to Friday’s nonfarm payroll report, which is expected to show a gain of 190,000 jobs in June after a gain of 272,000 in May, according to a Reuters poll of economists. The jobless rate is forecast to be unchanged at 4.0%.

Currency

offer

prices in

July 3​

02:46

afternoon GMT

RIC Description Last Percent USA YTD Percent Highest Lowest

in Close Change offer Offer

Previous

Session

Dollar 105.16 105.67 -0.46% 3.74% 105.8 105.

index 04

Euro/Dollar 1.0802 1.0746 0.53% -2.13% 1.0817 $1.0

736

Dollar/Ye 161.24 161.43 -0.12% 14.32% 161.945 160.

No. 895

Euro/Yen 1.0802​ 173.45 0.42% 11.91% 174.51 173.

45

Dollar/Swiss 0.9004 0.904 -0.39% 6.99% 0.905 0.89

Edition 86

Pound sterling/ 1.2769 1.2686 0.65% 0.33% 1.2777 1.0

Dollar 736​

Dollar/Ca 1.3625 1.3678 -0.37% 2.81% 1.3686 1.36

Nadian 18

Australian/Up to 0.6723 0.6668 0.85% -1.38% 0.6734 USD 0.6

664

Euro/Switzerland 0.9725 0.9712 0.13% 4.73% 0.9733 0.97

p 08

Euro/Star 0.8458 0.8469 -0.13% -2.42% 0.8478 0.84

linga 6

New Zealand 0.6119 0.6078 0.67% -3.17% 0.6129 0.60

Dollar/Up to 7

ll

Dollar/No 10.537​ 10.6679 -1.23% 3.97% 10.6953 10.5

road no. 268

Euro/Norway 11.3827 11.4634 -0.7% 1.42% 11.4925 11.3

there are 847

Dollar/Swedish currency 10.4769 10.576 -0.93% 4.07% 10.5911 10.4

paradise 67

Euro/Sweden 11.3187 11.3644 -0.4% 1.74% 11.3808 11.3

at 185