The dollar retreated broadly on Friday amid reports from the Wall Street Journal that China is considering U.S. proposals addressing fentanyl trade, boosting optimism about potential tariff negotiations. Asian currencies rallied, with notable gains in the offshore yuan, though thin trading due to regional holidays limited broader market moves.

Robust US Jobs Data Limits Dollar Decline

April’s U.S. payrolls rose by 177,000, easing modestly from previous levels but strong enough to push two-year Treasury yields sharply higher to a one-week peak. The unemployment rate remained steady at 4.2%, tempering market expectations for imminent Fed rate cuts. Treasury yields rose 6-13 basis points, flattening the yield curve slightly (+51.7bp).

EUR/USD Edges Higher; Sterling Flat

EUR/USD rose marginally, holding above its critical 21-day moving average at 1.1278 amid cautious ECB optimism over continued rate cuts despite elevated inflation. GBP/USD was virtually unchanged around 1.3330, weighed by narrowing U.S.-UK yield differentials ahead of an anticipated Bank of England rate cut, although strength in the FTSE 100 provided support.

USD/JPY Recovers from Lows; AUD Jumps

USD/JPY briefly hit intraday lows near 143.73 but rebounded as improving sentiment lifted Treasury yields. Key resistance remains at 145.55. The Australian dollar surged nearly 1%, outperforming G10 peers, supported by stronger risk appetite and yuan appreciation.

Commodities Mixed Amid Caution

Oil prices declined by about 1.7%, reflecting caution ahead of next week's critical OPEC+ meeting. Gold slipped 0.30%, pressured by rising yields, while copper gained 1.09%, benefiting from improved market optimism on potential easing of trade tensions.

Currencies at close: EUR/USD +0.14%, USD/JPY -0.49%, GBP/USD +0.01%, AUD/USD +0.99%; Dollar Index down 0.30%.