* Euro hovers near session high vs dollar ahead of US
* Currencies in tight range, traders wary of big bets before
* EU summit next week awaited for signs of progress on debt
By Naomi Tajitsu
LONDON, Dec 2 The euro held on to recent
gains on Friday, supported by expectations that U.S. jobs data
would show the economy slowly recovering, but it struggled to
extend its rally in the absence of a comprehensive solution to
the euro zone debt crisis.
Trading ranges were tight, as few investors were willing to
buy the single currency aggressively given that it has already
rallied more than 1 percent this week even as it remains
vulnerable to the region's debt problems.
The non-farm payrolls report due at 1330 GMT is expected to
show an increase of 122,000 jobs and a steady unemployment rate
of 9.0 percent.
A positive surprise would underpin a recent string of solid
U.S. data and bolster risk sentiment, which might prompt some
selling in the dollar. A weaker-than-expected outcome may push
investors to take more profits on recent euro gains.
Johan Javeus, chief strategist at SEB in Stockholm, said he
expected the data would confirm the U.S. economy is faring
better than it was in the first half of the year, although it
would not show a very strong recovery trajectory.
"It should confirm what we've seen in other data, that
things are not as bad as people thought a few months ago. In
that sense I don't expect a really big reaction from this number
should it come in line with expectations or slightly better," he
"In the end, focus is on what could happen with the
political process in Europe and that will take precedent."
But with investors sidelined before the jobs report, market
participants showed little reaction to a speech by German
Chancellor Angela Merkel, who told parliament the euro zone debt
crisis could not be solved in one fell swoop and urged tighter
French and German leaders are meeting next Monday to
outline joint proposals to put to a Dec. 9 EU summit, seen as
yet another make-or-break meeting for the 12-year-old currency
The euro traded 0.1 percent higher on the day at
$1.3480. It hovered near a session high at $1.3492 but failed to
rise further due to selling by an Asian sovereign name, along
with a semi-official European name, according to traders.
More offers were lurking near $1.3500, where large options
were due to expire later in the day.
Other currencies perceived to be higher risk, including the
Australian and New Zealand dollars, also edged up against a
slightly softer dollar, which slipped 0.1 percent versus a
currency basket to 78.235.
A 1.3 percent rise in European share prices
suggested an ongoing improvement in risk appetite this week,
which has prompted investors to sell the safe-haven U.S.
Against the yen, the dollar edged up 0.2 percent to 77.80
EU SUMMIT AWAITED
The euro has held gains after rallying earlier in the week,
when major central banks around the world took coordinated
measures to increase dollar liquidity to prevent a liquidity
crunch in markets.
Analysts said this had provided a stop-gap measure to
stabilise markets for now, while adding that investors had big
expectations for the EU summit next week.
Morgan Stanley said it had used the euro's gains this week
to establish a renewed bearish position on the single currency
as it stuck to its view of more weakness in the currency in the
"We continue to look for the market to be disappointed by
the European Summit," its analysts said in a note, adding that
they expected the euro to also underperform commodity
currencies, particularly the Canadian and Australian dollars.
The European Central Bank hinted on Thursday it was ready to
move more aggressively to tackle the crisis if politicians agree
on much tighter budget controls in the euro zone, though it
stopped short of detailing what exact measures it would take.
Still, there is no agreement among EU policymakers regarding
how such controls could be implemented and many other problems,
including securing resources to leverage the euro zone's bailout
fund, linger unresolved. Analysts believe this will keep the
euro on the back foot.
Economists expect the ECB to help banks and an economy on
the verge of recession by cutting interest rates next week and
announcing longer-term cheap liquidity tenders with easier
collateral rules. Markets are pricing in a 25 basis point cut to
1.0 percent at the ECB's Dec. 8. policy meeting.