FOREX-Dollar rallies to 3-1/2 year high vs yen before U.S. jobs

Thu Mar 7, 2013 10:30pm EST

Related Topics

* Dollar/yen hits highest level since August 2009

* Euro/dollar slips but clings to bulk of Thursday's gains

* ECB wrong foots euro bears with optimistic comments

By Masayuki Kitano and Ian Chua

SINGAPORE/SYDNEY, March 8 (Reuters) - The dollar surged to a 3-1/2 year high against the yen on Friday, with the near-term focus on whether U.S. jobs data will fuel hopes for a further recovery in the U.S. labour market.

The euro eased versus the dollar but clung to the bulk of the gains made the previous day, when the European Central Bank wrong-footed investors who had positioned for a more dovish signal from ECB President Mario Draghi.

The yen remained under pressure as markets looked past the Bank of Japan's steady policy decision on Thursday to its April meeting, where new leaders are expected to take bolder action to defeat deflation.

The dollar climbed 0.7 percent to 95.44 yen on trading platform EBS as of 0318 GMT, its highest level against the yen since August 2009.

Traders said dollar buying by Japanese importers on Friday helped add to the yen's weakness.

The focus now is on the U.S. jobs data due later on Friday.

Economists polled by Reuters expect the U.S. economy to have created a net 160,000 jobs in February while the unemployment rate remained at 7.9 percent.

"If the jobs data turns out to be good I think we will start to see a 95 yen to 98 yen range," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

The dollar will probably be bought against the yen as long as the jobs data is broadly in line with expectations, Maeba said.

Market players expect the Bank of Japan to launch more monetary stimulus, possibly at its next meeting on April 3-4, when Haruhiko Kuroda, a vocal advocate of aggressive easing, is expected to have taken over as governor.

EURO SLIPS VS DOLLAR

The euro eased against the dollar but clung to the bulk of the gains made on Thursday, when the euro climbed about 1 percent as euro bears covered short positions after ECB President Mario Draghi gave no indication that the bank would cut interest rates further in the euro zone.

Draghi on Thursday played down the threat of contagion to other euro members stemming from a political stalemate in Italy. He also sounded upbeat on the outlook, saying there are many signs that market confidence in the euro area is returning.

The single currency slipped 0.1 percent to $1.3096.

Against the yen, the euro rose 0.6 percent to 124.98 yen .

Sterling, which had gained a slight reprieve after the Bank of England held fire on more economic stimulus on Thursday, eased 0.1 percent to $1.5005, still precariously close to a 2-1/2 year trough of $1.4965 that had been set on Thursday ahead of the BoE decision.

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