The dollar struggled on Friday to recover from sharp losses and was on track for a weekly decline as investors awaited a cumulative US data release following the reopening of the US government, amid expectations of a weakening economy.
The dollar fell overnight as a sell-off in US stocks and bonds recalled the market turmoil of April.
Investors have reduced their bets on a Federal Reserve interest rate cut in December, according to Reuters.
"There are hints of a US sell-off looming again," said Ray Attrill, head of foreign exchange research at National Australia Bank.
Expectations of no change in interest rates failed to lift the dollar, which fell to a two-week low against the euro overnight.
The single currency rebounded above $1.16 and was last trading at $1.1630.
Similarly, the Swiss franc held near its highest level in more than three weeks, stabilizing at 0.7933 against the dollar. The dollar index fell to hover near a two-week low of 99.27 and is on track for a weekly loss of 0.3%.
"Starting next week, we're going to get a lot of economic data from the US, and we think it's going to be very bad," said Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia. "I think the market is now bracing for a deluge of bad US economic data."
While this would typically fuel expectations of further monetary easing to support a weak economy, Capurso said the impending incomplete data could explain why Fed funds futures have moved in the opposite direction.
The White House has indicated that the October unemployment report may never be released because it relies on a survey of households that was not conducted during the government shutdown.
Investors see a less than 50% chance of a 25-basis-point rate cut next month, but the odds of such a move in January are very high. As for other currencies, sterling fell 0.3 percent to $1.3152, failing to hold onto its overnight gains of 0.45 percent against the dollar.
The pound's decline followed a Financial Times report that Prime Minister Keir Starmer and Chancellor Rachel Reeves had abandoned plans to raise income tax rates, a dramatic reversal just days before the budget announcement on the 26th of this month.
The dollar is declining and heading for weekly losses.
