NEW YORK (Reuters) - The dollar slumped against major currencies on Friday after a crucial U.S. job report disappointed investors had hoped the Federal Reserve would begin paring back its monetary stimulus this month.
The dollar slumped 1 percent against the yen and eased from a seven-week high against the euro after the data showed U.S. job growth was lower than expected in August, while the job count for the previous two months was revised lower.
Expectations the Fed would announce a tapering of its monthly bond purchases at its September 17-18 policy meeting have buoyed in the dollar lately. A reduction in stimulus will lift U.S. Treasury yields and bolster the appeal of dollar-denominated assets.
"The August employment report is weak enough to seriously throw into doubt the tapering the market widely expected on September 18th before this latest key release," said Alan Ruskin, global head of foreign exchange strategy at Deutsche Bank in New York.
"This is the kind of employment report that throws the cat among the pigeons, generating maximum uncertainty for markets."
The dollar index .DXY, which measures the greenback against a basket of six major currencies, was at 82.152, down 0.6 percent, moving away from a seven-week peak of 82.671 set on Thursday.
The jobless rate hit a 4-1/2 year low of 7.3 percent as Americans gave up the search for work.
Kiran Kowshik, currency strategist at BNP Paribas in New York said the report is consistent with the firm's view that the Fed will taper in December. Despite the downward revisions to previous months, the trend still shows an improving labor market.
The euro was last up 0.4 percent at $1.3176, rebounding from a session low of $1.3103, according to Reuters data, the lowest since July 19.
Against the yen, the dollar was down 1.1 percent at 99.06 yen, having hit a six-week high of 100.22 yen.
The safe-haven yen and Swiss franc gained on concerns about military action against Syria. The dollar fell 0.8 percent to 0.9376 franc.
U.S. President Barack Obama has so far defied pressure to abandon plans for air strikes against Syria at a summit on Friday that left world leaders divided on the conflict, but united behind a call to spur economic growth.
Russian President Vladimir Putin said Russia will maintain its long-standing military and economic support for Syrian President Bashar al-Assad.
Despite gains on Friday, the euro fell for the second straight week with a 0.3 percent decline in the last five days adding to the 1.2 percent drop seen last week. The dollar gained about 1 percent against the yen this week.
Currency speculators increased their bets in favor of the U.S. dollar to their highest in about a month in the latest week, according to data from the Commodity Futures Trading Commission released on Friday.
The value of the dollar's net long position rose to $20.08 billion in the week ended September 3, from $15.82 billion the previous week. The net long dollar position rose for a second straight week.
Additional reporting by Nick Olivari. Editing by Andre Grenon