By: Hillel Fuld
The USD was on the defensive versus the EUR today, approaching what were 5 week lows, following a big short squeeze in the single currency prior to U.S. jobs data, while the JPY lost ground as the squeeze spilled into the Asian market.
The USD was on a sharp decline this week, as a result of concerns about the strength or weakness of the U.S. economy, and it plunged on Thursday, hitting its lowest this year against the JPY, as short-covering by EUR bears unleashed a chain reaction.
The dollar index hovered just above a 2 month low after it lost 1.6 percent yesterday.
The index was consistent at 84.69, having broken through its 55-day moving average at around 85.
The greenback staggered up against the yen after hitting a seven-month low of 86.96 JPY in the fray.
But it faced selling at 88 yen, with the market on alert for any comments from Japanese authorities which might signal concern about the strength of the Japanese currency.
"This is broad-based dollar sales. It's not risk aversion -- rather dollar aversion," said Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo.
TheAUD initially rose against the dollar and climbed against the low-yielding Japanese currency after Australia's government announced a watered-down version of a proposed mining tax, easing concerns of negative consequences for business investments and share prices.