FOREX-Dollar shaken after fierce selloff, focus stays on US jobs
* Dollar suffers biggest one-day drop in 3 yrs vs yen
* Risk is for dollar to snap back on strong payrolls data
* Yen higher, commodity currencies off lows
By Ian Chua
SYDNEY, June 7 (Reuters) - The U.S. dollar nursed heavy losses early in Asia on Friday, having suffered its biggest one-day decline in three years against the yen as the market waited for a closely watched U.S. jobs report to gauge the health of the world's biggest economy.
Traders said there was no specific trigger for the vicious selloff in the greenback overnight, although the move has helped flush out some long USD positions ahead of the non-farm payrolls report due 1230 GMT.
Investors had turned bullish on the dollar on the belief that upbeat data would prompt the U.S. Federal Reserve to roll back its $85 billion per month bond buying program. However, with recent data inconsistent at best, and concerns that Friday's jobs data would disappoint forced some traders to cut their dollar-longs.
Economists polled by Reuters expect a rise of 170,000 jobs, following a similar sized increase in the previous month. Any disappointment in the numbers could dent growing talk the Federal Reserve will soon dial down its stimulus programme.
"It appears that markets are positioning for a weaker number," said Barclays Capital analysts, who are expecting a 175,000 rise in employment.
"We think that an outturn close to our forecast could lead to broad USD strength, especially versus low-carry currencies."
The dollar last traded at 97.32 yen, up slightly from late New York, where it skidded over 2 percent in its biggest one-day decline since May 2010 to a seven-week low of 95.90.
The greenback also lost ground on the euro, which rose 1.2 percent to a three-month high of $1.3306. It was last at $1.3244, little changed from late New York levels.
As a result, the dollar index slumped 1.3 percent to three-month lows. It was flat at 81.575 in early Asian trade.
General dollar weakness helped commodity currencies recover some of their recent hefty losses. The Australian dollar bounced off a 20-month low of $0.9435 to $0.9562.
Still, the Aussie remained within reach of its 2011 trough of $0.9388. A break there will take it back to levels not seen since September 2010.
One notable gainer was the yen, which also rose against the euro and other major currencies, threatening to undermine the Bank of Japan's stimulus efforts.
The euro fetched 128.94 yen, after suffering a 0.8 percent slide to a five-week low of 127.53 on Thursday.
As expected, both the European Central Bank (ECB) and Bank of England turned out to be a non-event for markets as they stood pat on policies at their respective meetings.
The ECB left its benchmark rate at a record low 0.5 percent, saying economic conditions did not warrant moves currently. It said it had discussed a raft of other policy options it could take if the euro zone economy does not emerge from recession later this year.
There is little in the way of market moving economic news out of Asia on Friday, leaving much of the focus on volatile Japanese stocks ahead of the U.S. job numbers.
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