The dollar retreated from a two-week high versus a basket of major currencies on Friday, knocked by weaker-than-expected US housing and jobs data the previous session, lower equity markets and higher oil prices.
US jobless claims have jumped and the pace of existing home sales has tumbled to a 10-year low, data showed on Thursday, reminding investors of the problems plaguing the world's largest economy.
A significant recovery in oil prices from a seven-week low hit on Thursday as well as a financials-led sell off in global equity markets also weighed on sentiment, dragging down the dollar and boosting the low-yielding yen and the safe-haven Swiss franc.
"We're seeing a reappraisal of the recent dollar strength. Broad dollar-positive sentiment has been capped on fresh signs of weakness in US financials," said Lee Hardman, analyst at BTM UFJ. "Focus will be on US equities and crude oil prices," he added, saying that more losses may be in store for the US currency.
The dollar was down 0.1 percent at 107.25 yen by 1008 GMT, having fallen as low as 106.59 yen. The US currency has retreated from a one-month high of 107.98 yen hit the previous day according to Reuters data.
The euro added 0.3 percent to $1.5720, but was still roughly three US cents below a record high set in mid-July. The single European currency recovered from a two-week low hit on Thursday after German business sentiment suffered its biggest drop since September 2001, according to the July Ifo index, while euro zone PMIs pointed to contraction in both the services and manufacturing sectors.
On Friday, the euro edged higher, brushing off figures showing a slowdown in money supply growth. Against a basket of six major currencies, the dollar fell 0.4 percent to 72.655, retreating from Thursday's two-week high.
A near 1 percent fall in European shares helped to add selling pressure on the dollar, as did a 0.4 percent rise in US crude oil prices to around $126.00, pulling away from a seven-week low of $123.50 yen hit on Thursday.
"I can see market participants being hesitant to drive the dollar higher unless oil prices fall," said Niels Christensen, FX strategist at Nordea in Copenhagen. Traders said the dollar was pressured on caution before more US data later in the day, including new home sales and durable goods orders for June, as well as a consumer sentiment poll.
"Further USD decline is likely today if the new home sales matches yesterday's dire existing home sales report," Societe Generale said in a research note. However analysts said that the scope for weak US data to hurt the dollar was limited as a fairly negative US picture is already priced in, and euro zone economic data has also been coming in on the weak side.