NEW YORK: The dollar slumped on Friday after signs of a less resilient US labor market reduced the outlook for how long the Federal Reserves will keep interest rates higher, while the yen surged on concerns the 10-year Treasury’s yield rose above 4%.

The US economy added the fewest jobs in 2-1/2 years in June, the Labor Department said in an employment report that also showed 110,000 fewer jobs were created in April and May than earlier reported.

A jump in the number of people working part-time for economic reasons also suggested a weaker labor market, but the pace of job growth remains strong and with inflation still double the Fed’s target rate, a rate hike this month is likely.

Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said markets are looking at next week’s release of the Consumer Price Index (CPI), which could show inflation slowing to 3.1%. That would reduce the likelihood of another rate hike by the Fed after one expected in late July.

The yen rose 1.37% to 142.13, a two-week high against the US currency, as the rise in 10-year Treasury’s yield above 4% heightened market concerns that Japan might intervene in currency markets, said Joe Manimbo, senior market analyst.

The dollar index fell 0.776% at 102.280, while the euro was up 0.72% to $1.0964. The dollar and other major currencies, with the exception of Japan’s yen, are in a tight trading range as most central banks are engaged in tightening monetary policy to fight inflation.