Dollar rebounds vs yen as eyes on U.S. jobs news
TOKYO (Reuters) - The dollar recovered from earlier losses against the yen on Friday as speculators trimmed positions ahead of all-important U.S. jobs figures due later in the day.
The dollar had fallen near five-week lows against the yen earlier in the session as the U.S. economic outlook darkened and expectations grew for further interest rate cuts by the Federal Reserve.
The yen trimmed earlier gains against the euro and other higher yielding currencies as Asian equities rose despite a 4 percent slide in Tokyo shares .T on the year's first trading day, which added to risk aversion and led investors to unwind carry trades at one point.
The dollar remained under pressure though as weak U.S. indicators, including data this week showing a contraction in the manufacturing sector in December, prompted investors to bet the Fed has little choice but to ease monetary policy further to shelter the economy.
Investors are now braced for a U.S. jobs report due later in the session that is expected to show a modest gain of 70,000 nonfarm payroll jobs in December, after a gain of 94,000 in November.
Traders said any lower number would reinforce expectations of more Fed rate cuts and knock back the dollar further.
"I expect U.S. jobs data to be weak, and if so the dollar could go as low as below 108 yen," said Hideaki Inoue, chief manager of the forex trading group at Mitsubishi UFJ Trust Bank.
"But the yen's gains may stop there this session without fresh factors to buy the Japanese currency. Also speculators' positions to buy yen are already big," Inoue said.
By late afternoon the dollar was at 109.40 yen JPY=, a tad above its rate in late U.S. trading on Thursday and recovering from Friday's low of 108.78 yen hit on electronic trading platform EBS when funds sold the currency in system-driven trade, traders said.
Japanese exporters also sold the dollar against the yen to hedge overseas earnings, helping to push it close to a five-week low of 108.25 yen hit on Thursday.
"Those who had hoped for a dollar rebound above 115 yen before the year-end are disappointed with the currency's new year drop, and are now awaiting any rebound to sell," said Kengo Suzuki, a currency strategist at Shinko Securities.
The euro was nearly flat at $1.4740 EUR=, holding near a five-week peak of $1.4782 hit in the previous session.
Earlier in the session, the yen rose against the euro and other higher-yielding currencies such as the Australian and New Zealand dollars as investors dumped carry trades in which the low-yielding yen is used to fund investment in higher-yielding currencies.
Investors often unwind such trades when risk appetite declines and currency market volatility rises.
The euro was nearly flat at 161.20 yen EURJPY=R after dropping as low as 160.45 yen on EBS, while the kiwi trimmed its losses but was still down 0.7 percent at 84.30 yen NZDJPY=R. Continued...
