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LONDON: The dollar held at 2-1/2 month lows on Monday as a weak US employment report spurred investors to unwind growing long positions in the greenback, with major rivals including the British pound and Australian dollar testing key levels.

The dollar index, which measures the greenback against six rivals, stood at 90.13, broadly flat on the day, after dipping as low as 90.128 for the first time since Feb. 26 earlier in the session.

The greenback’s losses in London trading were at odds with the broader markets where equity prices were higher and benchmark US Treasury yields well above Friday’s lows.

“There are plenty of key technical levels now broken on the pound and the Aussie, and without support from a Fed unwilling to taper, let alone raise rates, the dollar could have some hard sessions ahead,” said John Marley, CEO of forexxtra, a London-based FX consultancy.

The United States created a little more than a quarter of the jobs that economists had forecast last month and the unemployment rate unexpectedly ticked higher, casting doubt on whether the Fed would consider advancing the timeline for tightening policy in the coming months.

“The more erratic the recovery on the US labour market, the longer the Fed will take to consider rate steps,” Commerzbank strategists said in a daily note.

Even before the big payrolls miss, Fed Chair Jerome Powell had argued the US labour market is far short of where it needs to be to start talking of tapering asset purchases, and that a near-term spike in inflation will be transitory.

Several Fed officials will have a chance to reinforce that message this week, beginning with Governor Lael Brainard on Tuesday.

The British pound was the biggest gainer among the most-traded currencies, rallying 0.8% above $1.41, the highest since Feb. 25. This was despite Scotland’s leader saying that another referendum on independence is inevitable after her party’s resounding election victory.

Such a referendum requires the backing of the UK government in London and Prime Minister Boris Johnson has ruled out holding another vote, saying the country faces more pressing challenges such as economic recovery from the coronavirus pandemic.

The Australian dollar was another beneficiary of the weakening dollar trend, with a surge in commodity prices also supporting the Antipodean currency.

The Aussie dollar traded close to a more-than-two-month high at $0.7884, while the US dollar fell to a fresh 3-1/2-year low of $1.2111 against its Canadian rival.

The euro rose 0.1% to $1.2170, earlier touching the highest since Feb. 26 at $1.2177.

“The unexpected slow recovery in the US labour market reinforces the FOMC’s patient approach to monetary policy,” while “the improving global economic outlook is a medium-term weight on the USD,” Commonwealth Bank of Australia strategist Kim Mundy wrote in a client note, predicting a break above $1.22 for the euro.

That view was shared by JP Morgan strategists, who cut their net long dollar positions against a basket of G10 currencies, notably the euro and the Antipodean currencies. Broader positioning data also revealed a similar trend. In cryptocurrencies, ether extended this month’s record run, surging more than 5% to an unprecedented $4,148.88. The second-biggest digital token has rallied 41% so far in May.

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