The dollar fell Friday after soft US labor data reduced expectations that the Federal Reserve will raise interest rates in the near term. The greenback dropped to its lowest level since May, as traders reassessed the likelihood of further tightening. The soft US labor data suggested the economy may be cooling, diminishing the case for another rate hike.

This shift in sentiment pushed the dollar lower against major currencies, with the euro and yen gaining ground. The Federal Reserve has been closely monitoring economic indicators, and the latest employment figures added to uncertainty about the pace of policy normalization. Analysts noted that the dollar could face additional pressure if upcoming data continues to weaken.

The decline marks a significant reversal from earlier gains, when strong growth and inflation fueled rate hike expectations. Investors are now watching for comments from Fed officials and next week's consumer price index for further clues. The dollar's slide has implications for global trade, commodities, and emerging markets, as a weaker greenback tends to boost export competitiveness and support risk assets.

However, the move also reflects growing caution about the US economic outlook. The market is pricing in a lower probability of a rate hike at the next meeting, with some even speculating about a potential cut later this year. The dollar's trajectory will depend on incoming data and the Fed's response.