* Dollar index on track to lose nearly 0.7 pct this week
* Move still seen as consolidation after three weeks of
* Dollar/yen down from 9-1/2 month high set on Thursday
* Earlier bets against euro squeezed before Italy vote
* Euro/dlr implied volatility up
By Patrick Graham
LONDON, Dec 2 The dollar was on course for its
first weekly fall in four weeks against the euro and a basket of
currencies on Friday, with investors trimming bets against the
single currency before U.S. jobs numbers and Italy's
Bets on the euro have largely been taken on options markets
this week, driving implied volatility of the currency to its
highest since Britain's vote to leave the European Union in
But spot rates for the single currency have held up as the
U.S. currency drifted lower, a move that most analysts cast as a
short-term correction on the dollar's surge since Donald Trump's
election on Nov. 8. Most banks forecast a broadly stronger
dollar next year.
"We're in a period of consolidation. We saw this in October,
we spent the whole month rising and then we had a week of
sideways trading," said Neil Mellor, a strategist at BNY Mellon
"I don't think we need to overcomplicate things today. You
have the Friday factor, there is always a degree of reserve
before payrolls. It does also feel as if liquidity is already
falling ahead of the end of the year. Some people may be sitting
back and waiting for January."
In early trade in Europe, the dollar index dipped 0.2
percent to 100.86, down 0.6 percent for the week. It was
roughly steady against the euro while pulling back from
Thursday's 9 1/2-month highs of 114.83 yen.
The logic behind the dollar's gains has been broadly about
another rise in U.S. Federal Reserve interest rates later this
month raising the premium for holding dollars.
That now looks fully priced-in, however, and some have
argued the dollar may struggle for momentum until there is more
clarity on Trump's economic policy proposals and their ability
to raise inflation rates and in turn drive rates higher.
"The sense I get is that people who have sold (the dollar)
on rallies have taken a hit, while bulls are still doing fine,"
said a trader with one Japanese bank, adding that market
participants are probably looking to buy the dollar on dips.
Economists polled by Reuters expect that U.S. employers
added 175,000 jobs in November, although a poorer batch of
weekly jobs figures on Thursday hinted at a weaker number.
The focus for the euro is now on an Italian referendum on
Sunday that could reject constitutional reforms, on which Prime
Minister Matteo Renzi has staked his political future.
His departure could destabilise Italy's fragile banking
system and be taken as another sign of rising anti-establishment
sentiment around the world, potentially eroding investor
confidence in the currency union.
"High-frequency accounts and leveraged specs (speculative
traders) have been reported on the bid, though there are plenty
of offers ready to cap overdone rallies," analysts from
currencies exchange LMAX said in a morning note.
"There is sure to be plenty of volatility in Asia on Monday
as the result of the Italian referendum comes in."
(Additional reporting by Shinichi Saoshiro in Tokyo, editing by