FOREX-Dollar slips before U.S. jobs data, euro recovers
* Focus on US payrolls; growth of 145,000 jobs expected
* Euro recovers, gains against dollar
* ECB's Nowotny plays down prospect of negative deposit rates
By Anirban Nag
LONDON, May 3 (Reuters) - The dollar fell against a basket of currencies on Friday as investors focused on whether a jobs report will add to concerns about the U.S. economy and boost bets on more monetary easing.
April nonfarm payrolls are due at 1230 GMT, and economists polled by Reuters are looking for relatively modest jobs growth of 145,000, up from 88,000 for March. The U.S. unemployment rate is seen holding steady at 7.6 percent.
The index measuring the dollar's performance against six major currencies was down 0.1 percent at 82.151, with most losses coming against the euro. The dollar was steady against the yen at 98.05 yen in fairly subdued trade as Japanese markets are closed on Friday for a public holiday.
If the payrolls data adds to recent signs of a softening in the U.S. economy, it could feed speculation the Federal Reserve might boost rather than scale back its bond-buying programme.
Such talk would weigh on the dollar in the short run. A better-than-expected number could offer the currency some relief from its recent losses, especially against the yen.
"If we have a weak number, expectations will grow for the Fed to act," said Geoffrey Yu, currency strategist at UBS.
ECB FOR WEAKER EXCHANGE RATE
The euro rose against the dollar, helped by comments from European Central Bank policymaker Ewald Nowotny who said the market was over-interpreting comments about possible negative interest rates in the euro zone.
The euro edged up 0.2 percent to $1.3091, but remained well below a two-month high of $1.3243 set on Wednesday on trading platform EBS. Traders said it was unlikely to rise above reported offers at $1.3115/20 from sovereign investors.
The single currency came under pressure after ECB President Mario Draghi said on Thursday the bank was technically ready for negative deposit rates and noted downside risks to the economy.
A negative deposit rate would penalise banks for hoarding cash. That could drive money out of the euro zone into higher-yielding assets and encourage the banks to lend out money rather than hold it at the central bank.
"Putting the deposit rate into negative territory comes at a significant cost, undermining especially money market fund flows into weaker peripheral banks," Morgan Stanley said in note.
"Bearing these costs in mind and Draghi showing his readiness to use the negative deposit rate anyway is one of the clearest indications that the ECB wants a weak exchange rate."
Nowotny said on Friday the possibility of a negative deposit rate was not relevant in the near term.
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