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    Dollar tumbles over 1% on weak U.S. economic reports

    The dollar tumbled over 1% against the other major currencies on Friday, after the release of weak U.S. data dampened optimism over the strength of the economy and lowered expectations for a summer rate hike by the Federal Reserve.

    USD/JPY lost 1.81% to 106.89, the lowest since May 6.

    The Institute of Supply Management said its non-manufacturing purchasing manager's index fell to 52.9 last month from 55.7 in April. It was the weakest reading since February 2014. Analysts had expected the index to drop to 55.5.

    The report came after the Labor Department said the U.S. economy added 38,000 jobs in May, far below expectations for an increase of 164,000. The economy created 123,000 jobs in April, whose figure was revised from a previously estimated gain of 160,000.

    However, the report also showed that the U.S. unemployment rate fell to a more than eight-year low of 4.7% last month from 5.0% in April, compared to expectations for a downtick to 4.9%.

    Average hourly earnings rose by 0.2% in May, in line with expectations.

    The data dampened expectations for an upcoming U.S. rate hike. Fed Chair Janet Yellen said late last week that it could be appropriate to raise rates in the coming months if the economy and the labor market continue to pick up as expected.

    Data also showed that the U.S. trade deficit widened to $37.40 billion in April from a revised deficit of $35.50 billion in March. Analysts expected the trade deficit to widen to $41.30 billion in April.

    A separate report showed that U.S. factory orders increased by 1.9% in April, beating expectations for a 0.9% rise and after a 1.7% gain the previous month.

    EUR/USD rallied 1.53% to a two-and-a-half week high of 1.1324.

    The dollar was lower against the pound and the Swiss franc, with GBP/USD up 0.57% at 1.4505 and with USD/CHF declining 1.32% to 0.9772.

    Earlier Friday, research group Markit said its U.K. services PMI rose to 53.5 last month from a reading of 52.3 in April. Analysts had expected the index to rise to 52.5 in April.

    The Australian and New Zealand dollars continued to push higher, with AUD/USD up 1.22% at a two-and-a-half week high of 0.7316 and with NZD/USD jumping 1.82% to a five-week high of 0.6936.

    Elsewhere, USD/CAD plummeted 1.02% to trade at a one-week low of 1.2967.

    Statistics Canada reported on Friday that the trade deficit narrowed to C$2.94 billion in April from C$3.18 billion in March, whose figure was revised from a previously estimated deficit of C$3.41 billion.

    Analysts had expected the trade deficit to narrow to C$2.45 billion in April.

    The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 1.43% at 94.18, the lowest since May 12.


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