LONDON, July 6: Initial dollar gains from a strong US labour report on Friday petered out as the market appeared to stick to its long-term view that interest rates would not rise higher in the United States.

Meanwhile, the European single currency struck a record high of 167.91 yen owing to interest-rate differentials, dealers said.

In late European trade, the euro stood at $1.3630, up from $1.3596 during late trading in New York on Thursday.

The dollar climbed to 123.19 yen, from 122.92 yen late on Thursday.

The US currency got a solid boost against most other major currencies after a key non-farm payrolls report exceeded expectations, the latest in a recent string of healthy indicators on the US economy.

But despite the numbers’ strength it was not surprising that subsequent dollar gains were only temporary, said Neil Mellor at the Bank of New York.

“The dollar is up against a barrier,” he explained.

“From a technical point of view it has had the upper hand recently, but in terms of underlying interest rate expectations, which are the predominant driver in the market, the dollar’s problem is that a Federal Reserve rate hike is simply not in the picture.

“Unlike in Europe, interest rates in the US have probably hit a peak and there’s a very good chance of further gains by the euro against the dollar and sterling (the pound) against the dollar,” he said.

Mellor also noted that the market’s continued appetite for risk, which has caused high-yielding currencies to rise against the yen, is also helping European currencies gain against the dollar.

On this note the yen continued to flounder against the euro, the Australian dollar, the New Zealand dollar and the pound.

Renewed global risk appetite is supporting the carry trade -- a high-risk strategy where people borrow in low-yielding currencies like the yen and invest the funds elsewhere to earn higher yields.

“It is business as usual for yield seekers,” said Bank of New York’s Mellor.

Meanwhile, the euro and the pound were both steady as the market digested interest rate decisions and hawkish rhetoric from central banks yesterday.

On the London Bullion Market, the price of gold dipped to 648.75 dollars per ounce, from 651 dollars late on Thursday.—AFP