Australia's dollar dropped at least 0.3 per cent against all of its 31 major peers after Reserve Bank governor Glenn Stevens said the currency was "overvalued" by most measures. The aussie also declined after retail sales unexpectedly fell in May. The US dollar rose against the yen for a third day as a stronger-than-expected private jobs report boosted optimism that nonfarm payroll data today will show the US economic recovery is gaining traction. The euro held a three-day gain versus the yen as investors awaited clues on the European Central Bank's next move. It makes the case for aussie [weakness] against a range of currencies SEAN CALLOW, WESTPAC "Stevens' language is about as strong as could be expected without introducing an explicit policy-easing bias," said Sean Callow, a senior currency strategist at Westpac Banking in Sydney. "It makes the case for aussie underperformance against a range of currencies until further notice." The aussie yesterday weakened 0.7 per cent to 93.79 US cents in Tokyo from Wednesday, when it dropped 0.6 per cent. It reached 95.05 on July 1. The greenback gained 0.1 per cent to 101.87 yen, after earlier touching 101.94, the highest since June 25. It is up 0.5 per cent this week. The dollar fetched 1.3651 per euro from 1.3660 at the close in New York, having strengthened 0.2 per cent in the previous two sessions. The euro was little changed at 139.06 yen, up 0.5 per cent this week. Investors are under-estimating the probability of a "significant fall" in the Australian dollar at some point, governor Stevens said in a speech. "Most measurements would say it is overvalued, and not just by a few cents," he said in the text of a speech. Policymakers on Tuesday held the interest rate unchanged at a record low 2.5 per cent, where it has been since August. Australian retail sales declined 0.5 per cent in May, after falling a revised 0.1 per cent the previous month, a government report showed yesterday. Economists predict the measure would be unchanged. "The retail sales numbers are certainly adding fuel to the fire," said Chris Weston, chief market strategist at IG in Melbourne. Stevens' speech "says to me the market should have a slight bias toward rate cuts, rather than rate hikes". Interest-rate swaps data show traders see a roughly 30 per cent chance the RBA will lower its benchmark by December. In the US, traders are pricing in a 44 per cent chance that the Fed will raise borrowing costs from virtually zero by June 2015, down from 51 per cent odds before Fed chairman Janet Yellen reiterated on June 18 that rates would stay low for a "considerable time". In Europe, economists forecast the ECB would keep rates unchanged.