* U.S. dollar gyrates in narrow ranges after solid U.S. jobs
* Markets digesting data and ECB's moves to loosen policy.
* Euro still seen vulnerable given increasing policy
(Recasts with U.S. jobs data, fresh prices, new byline, new
dateline, previous LONDON)
By Daniel Bases
NEW YORK, June 6 Investors trimmed U.S. dollar
holdings on Friday after a solid May U.S. jobs report nearly
matched consensus and left little chance the U.S. Federal
Reserve will deviate from its course of removing monetary
accommodation from a strengthening economy.
This follows Thursday's long-promised steps by the European
Central Bank to increased the level of monetary stimulus into
the euro zone economy, which over time puts pressure on
investors to sell euros and buy higher yielding currencies.
However, for the time being currencies are hewing to tight
trading ranges after the two events.
"I think it will take a few days for the market to digest
what has come out from the ECB and the jobs report, and
therefore we could see in the interim some caution and no one
wanting to take large bets in any one direction," said Martin
Schwerdtfeger, currency strategist at TD Securities in Toronto.
The euro gyrated after the data, initially selling
off but then catapulting to a fresh, but brief, two-week high of
$1.3677. It has settled back to $1.3658, unchanged on the day.
The data, which showed the U.S. economy added 217,000
non-farm jobs, versus the Reuters consensus forecast of 218,000,
brought employment to its pre-recession levels and indicates an
economy that has snapped back from a harsh winter.
It may take until next week for the dust to settle on the
ECB's moves, making good on hints that it would take strong
action to both support the economy and, in passing, halt gains
for the euro which have driven inflation below targets.
A four percent rise in the euro between January and the
start of May has been one of this year's big surprises on
financial markets, shaking out investors who had bet on the
dollar strengthening across the board.
The conclusion of many from Thursday's action is that the
ECB on its own will struggle to weaken the single currency.
"It is still all about the Fed," said one London-based
dealer. "Until we get more certainty about the prospect of
stronger growth and higher interest rates in the United States,
there are too many other factors in the euro's favour."
Ahead of the U.S. data, London dealers said there were
options to buy over 3 billion euros set at $1.3600, naturally
dragging the currency towards that number given the lower
volumes of trade.
The consensus on Friday was that without any stronger
impulse from the dollar side, it would take the sort of outright
government bond-buying implemented by the U.S. Federal Reserve
to undermine the euro.
Trading ranges were narrow elsewhere. The dollar was off
just 0.08 percent at 102.30 yen and the euro was off 0.14
percent at 139.70 yen. The dollar index initially hit a
1-1/2 week low but then trimmed those losses.
(Additional reporting by Patrick Graham in London; Editing by
Catherine Evans and Meredith Mazzilli)