U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022.
U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. Reuters / DADO RUVIC

The dollar edged lower on Friday as risk appetite picked up ahead of U.S. jobs data later in the day.

Equities rose as investors hoped U.S. data might sway the Federal Reserve to slow its current aggressive pace of interest rate hikes over the coming months.

The ADP National Employment Report on Thursday showed U.S. payrolls rising at a slower-than-expected pace last month.

Trading on Friday is quieter with London markets shut for a public holiday.

The dollar eased 0.1% to 101.75 against a basket of other major currencies, while the euro inched up 0.1% to $1.0747.

Investors have had mixed views on the greenback since it hit a 10-year high in mid-May.

George Saravelos, global head of forex research at Deutsche Bank, said the dollar is "pricing a safe-haven risk premium that is so extreme it rarely has persisted over time and is now in the process of unwinding".

Bullish analysts argue that the Fed's tightening cycle is based on a sturdier growth story than Europe's, especially after the Russian oil embargo, which might hurt the economy of the euro area.

The European Union has agreed an embargo on Russian crude oil imports that will take full effect by the end of the year.

"The USD recovery on the back of new hawkish signals from the Fed is lacking momentum, with the dollar index having difficulty holding the 102 handle again," Unicredit analysts said in a research note.

They pointed to Fed Vice Chair Lael Brainard's comments on Thursday that it was "very hard" to see the case for a September pause in raising rates, which failed to support the dollar.

Minutes of the Fed's May meeting suggested the central bank could pause its tightening once the policy rate is back to its neutral level.

Meanwhile, the Swiss franc is around levels hit in mid-May after Swiss National Bank president Thomas Jordan signalled the central bank might act if inflation pressures continue.

The SNB has so far stuck to its ultra-loose policy but Swiss prices increased to their highest level in nearly 14 years in May.

The yen was not far off its 10-year low versus the greenback at around 130 as the Bank of Japan (BoJ) stuck to its super-low interest rate policy stance.

BoJ Governor Haruhiko Kuroda said on Friday it was undesirable for prices to rise too much when household income growth remains weak.

The Canadian dollar was flat at 1.2571 versus the greenback after jumping the day before as the Bank of Canada opened the door to a more aggressive pace of tightening.

Bitcoin rose about 0.6% and was last trading at $30,379. Ether fell 1% at $1,815.