FOREX-Dollar stalls ahead of US jobs data as euro regains ground

Fri Jan 10, 2014 12:34am EST

Related Topics

* Dollar index slips from seven-week highs as payrolls report awaited

* Euro finds its footing after slip on dovish ECB comments

* Canadian dollar among worst performers this week

* China trade data underpins Aussie

By Lisa Twaronite and Ian Chua

TOKYO/SYDNEY, Jan 10 (Reuters) - The U.S. dollar inched away from a seven-week high on Friday as investors booked some profits ahead of the keenly-awaited U.S. jobs report, while the euro found firmer footing after it was unsettled by dovish comments from the European Central Bank.

The dollar index last stood at 80.920, down 0.1 on the day, having retreated from a high of 81.187 on Thursday, its loftiest level since late November.

Traders said the greenback could easily rebound if non-farm payrolls surprised on the strong side and fuelled expectations that the Federal Reserve will scale back its bond-buying stimulus more quickly.

Economists polled by Reuters forecast that employers probably added 196,000 jobs, down from 203,000 in November, while the jobless rate likely held at a five-year low of 7.0 percent.

On the other hand, a downside surprise could bolster the yen, and sideline Japanese exporters, who sell dollars to repatriate overseas earnings, market participants say.

"The exporters are not in a rush, and are only going to be doing the minimal operations at the fixing. They're fine -- they're hedged on the downside," said a trader at a Japanese bank on Tokyo.

From September onward, exporters have been hedged between 95/98 yen, while in November/December, some of the larger exporters hedged at 100/102 yen, she said.

Against the yen, the greenback edged up slightly to 104.92 , but was still shy of Thursday's high of 105.05 yen and a five-year high of 105.45 yen hit earlier last week as the improving U.S. economic outlook heightened expectations that the Fed will speed up its stimulus reduction.

Janet Yellen, set to take over as head of the Fed next month, is "hopeful" that U.S. economic growth will accelerate in 2014 to reach 3 percent or more and persistently low inflation will move up toward the central bank's target, she was cited saying in a Time magazine interview published online on Thursday.

"Most of my colleagues on the Fed's policymaking committee and I are hopeful that the first digit (of GDP growth) could be 3 rather than 2," Yellen said in the interview.

The euro rose as high as $1.3616 and was last slightly up on the day at $1.3611, moving away from a one-month low of $1.3548 touched overnight and back toward a two-year high of $1.3894 set at the end of last month.

The common currency had initially fallen after the ECB forcefully underlined its determination to take action should deflation become a real risk or if rising money market rates threaten the bloc's fragile recovery.

"The Governing Council strongly emphasises that it will maintain an accommodative stance of monetary policy for as long as necessary," ECB President Mario Draghi said after the decision to leave the main interest rate at 0.25 percent.

But the euro ran into strong buying interest, traders said. Its failure to break below chart support around $1.3525 forced those who had sold earlier to quickly cover their positions.

The common currency also climbed against the yen, up about 0.1 percent on the day at 142.77 yen, but still well short of its five-year peak of 145.67 yen set last month.

For the week, the Canadian dollar is in contention to be the worst performer among major currencies, having already shed nearly 2 percent to its lowest in more than four years.

A string of disappointing domestic data has soured sentiment for the loonie, which fell as low as C$1.0875 per dollar on Thursday, a level not seen since October 2009. It was last at C$1.0847 per dollar, up slightly on the day.

The Australian dollar didn't fare as badly although it has drifted lower through the week. The Aussie has shed 0.6 percent for the week with sentiment remaining fragile after a 14.3 percent slump last year.

The Aussie traded at $0.8898, slightly higher on the day, underpinned by trade data from China, Australia's key export market.

China's export growth slowed more than expected in December due to a higher comparison base a year earlier and a clampdown on speculative activities. But China posted an 8.3 percent jump in imports versus forecasts of 5.3 percent, and the outlook for trade in 2014 is expected to be brighter as global demand picks up.

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