The dollar suffered a setback after a weak US labour market report raised further questions about the health of the world's biggest economy. The much awaited non-farm payrolls rose by just 92,000 well short of the 135,000 expected, while data for the previous two months were revised down by a total 8,000. To make matters worse, the jobless rate rose to 4.6 pct. The numbers are likely to fuel fears that problems in the weak US housing sector are spreading to the labour market, which has so far been underpinning consumer demand. "The euro is back testing the 10-day moving average line into 1.3720 usd," said Matthew Foster-Smith at Thomson IFR Markets. Despite the euro's quick gains from under 1.37 usd, he does not see a significant breakthrough for the single European currency until the 1.3750 usd level gives. The dollar had started the day on the back foot after some semblance of normality returned to stock markets yesterday. Gains on European equities today suggest that the calm will continue today too. Later, attention turns to the Institute of Supply Management's July non-manufacturing index, which is forecast to dip slightly to 59.0 from 60.7. A weaker than expected will add to the pressure on the already beleaguered dollar. Elsewhere, the euro stayed well bid after the final services sector purchasing managers' index for the region remained unchanged from June at 58.3 in July, an upward revision from the provisional estimate of 58.1 and above market expectations for no change from that estimate. This is likely to boost already-firm expectations that euro zone interest rates will rise to 4.25 pct in September. The euro had rallied overnight, rising above 1.37 usd following hawkish talk from the European Central Bank (ECB) yesterday and as risk appetite returned to financial markets, but it fell back on profit-taking. At an impromptu press conference yesterday ECB president Jean-Claude Trichet used the phrase "strong vigilance", which markets took as a signal that euro zone interest rates will rise in September. In television interviews this morning, Trichet has restated this stance, and also called for more flexibility in Asian currencies. "The use of 'vigilance' is deemed code word for 'we intend to hike rates at the next meeting'... the focus now is on whether the September move will be the last," said Stuart Bennett, euro zone economist at Calyon. Today's return of calm to financial markets has also pushed the yen weaker, as investors return to the carry trade -- a risky strategy where they borrow in the low-yielding yen to invest in high yielding currencies elsewhere.