FOREX-Dollar drifts lower with focus turning to US jobs report

Thu Feb 6, 2014 6:33pm EST

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By Lisa Twaronite

TOKYO, Feb 7 (Reuters) - The dollar drifted slightly lower in early Asian trading on Friday, as investors cautiously awaited the latest non-farm payrolls report for clues on the health of the U.S. labour market and the broader economy.

The payrolls data, which is due later Friday, is expected to show that employers added 185,000 jobs in January, according to the median estimate of 101 economists polled by Reuters.

The number of Americans filing new claims for unemployment benefits fell more than expected last week, data showed on Thursday, dropping by 20,000 new claims.

"The non-farm payrolls report is always an important release for the U.S. dollar but this month in particular, it could make or break the greenback," Kathy Lien, managing director at BK Asset Management, said in a note to clients.

"In January, the U.S. dollar collapsed and officially peaked after the worst NFP report in nearly 3 years. This month investors are hoping for a strong rebound that will restore demand for U.S. assets," she said.

But even if labour conditions improve, Boston Federal Reserve President Eric Rosengren said late Thursday that the central bank should be "quite patient" in removing stimulus because broader measures of the U.S. labour market remain weak.

Rosengren, considered a dovish Fed official, said the labour market conditions remain far from those which would warrant higher interest rates.

Other data released on Thursday showed U.S. exports weakening in December, which could drag on growth if that trend were sustained into the first quarter.

The dollar drifted down about 0.2 percent against a basket of currencies to 80.886, and shed about 0.1 percent against its Japanese counterpart to 102.03 yen.

The euro was steady against the greenback after rallying to a one-week high of $1.3619 on Thursday, following European Central Bank President Mario Draghi's comment that the euro zone is not plagued by deflation.

The ECB left interest rates unchanged at its policy meeting on Thursday, opting to wait for more data before taking action.

Euro zone inflation eased to 0.7 percent last month and retail sales on Wednesday fell short of expectations, while recent upbeat business sentiment surveys add up to a mixed picture of economic conditions in the euro zone.

The euro was last steady on the day at $1.3589, well off a more than two-month low of $1.3475 plumbed on Monday. It gave up about 0.1 percent against the yen to 138.64 yen, though it remained above a more than two-month low of 136.20 yen hit on Tuesday.

The Australian dollar inched slightly lower to $0.8950 as investors awaited the Reserve Bank of Australia's latest statement on monetary policy.

The Aussie surged over half a U.S. cent on Tuesday after the RBA dropped its bias towards easing policy and toned down its rhetoric calling for a weaker currency.

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