July 3 (Bloomberg) -- The dollar was little changed against the euro, heading for a weekly gain, as speculation the economic recovery is faltering boosted demand for the safety of the U.S. currency.

The Dollar Index, which tracks the currency against those of six major U.S. trading partners, advanced for a second day after a report yesterday showed U.S. employers cut more jobs last month than economists forecast. The pound fell against the dollar, poised for its first weekly loss in a month, as a report showed the nation’s service industries were little changed in June as the recession persisted.

“It’s a question of risk aversion and people got back into the dollar,” said Antje Praefcke, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-largest lender. “The risk for stock markets is to the downside.”

The dollar traded at $1.4002 per euro as of 9:24 a.m. in New York, from $1.4003 yesterday, for a 0.4 percent appreciation this week. It reached $1.3929 earlier, the strongest since June 25. The yen was at 134.36 per euro, from 134.34. The U.S. currency was at 95.96 yen, from 95.94. The dollar may gain to $1.36 by the end of the month, Praefcke said.

The pound was at $1.6343, from $1.6393 yesterday, down 1.1 percent in the past week. The U.K. currency was at 156.84 yen, from 157.28 yen, after reaching the weakest level since June 25.

Currency movements may be volatile today as a holiday in the U.S. reduces trading volumes, said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank.

Job Losses

U.S. employers cut 467,000 jobs in June, after losing a revised 322,000 positions the previous month, the Labor Department said in Washington yesterday. The jobless rate increased to 9.5 percent from 9.4 percent. Europe’s service industry contracted at a faster pace in June, London-based Markit Economics said today.

“As feared, the poor jobs report prompted a sizeable paring of risk appetite across foreign-exchange markets,” UniCredit Markets & Investment Banking analysts including Roberto Mialich in Milan wrote in a client note today. “The euro was obviously dragged down.”

The dollar strengthened most against the South African rand as European stock markets declined. Europe’s Dow Jones Stoxx 600 lost as much as 0.6 percent, set for a third week of losses.

The pound declined against 15 of the 16 most actively traded currencies after growth in U.K. service industries slowed in June, giving the Bank of England more reason to keep borrowing costs at a record low.

‘Damp Appetite’

An index based on a U.K. survey of about 700 service companies by the Chartered Institute of Purchasing and Supply fell to 51.6 in June, from 51.7 in May.

Investors should sell the pound on speculation the central bank will expand asset purchases when it meets to set monetary policy next week, strategists led by Hans-Guenter Redeker, global head of foreign-exchange strategy at BNP Paribas SA, wrote in a client note today.

The yen weakened against the New Zealand dollar after Kyodo News reported Japan may consider investing about 10 percent of its public pension-reserve funds in assets with “high risks and high returns.”

Japan’s pension-reserve balance was 123 trillion yen ($1.28 trillion) as of March 2009, Kyodo said, citing Health Minister Yoichi Masuzoe.

“If the government wants to buy more foreign bonds for its public pension reserve funds, that’s yen negative,” said Masaki Fukui, a senior market economist in Tokyo at Mizuho Corporate Bank Ltd., Japan’s second-largest publicly traded lender.

The New Zealand dollar gained 0.5 percent to 60.54 yen, while the Australian dollar climbed 0.6 percent to 76.59 yen.