* Euro lifted by better-than-forecast euro zone PMI
* Slight pullback on ECB loan repayments announcement
* Focus on U.S. payrolls data at 1330 GMT
By Nia Williams
LONDON, Feb 1 The euro hit a 33-month high
against the yen and a 14-month peak against the dollar on
Friday, lifted by improving euro zone manufacturing data and
bets of a firm U.S. jobs number.
News that banks will repay less than expected in European
Central Bank three-year loans next week dented some demand for
the euro, but losses were limited by optimism the worst of the
region's debt crisis is over.
A Purchasing Managers' Index (PMI) survey showed euro zone
factories had their most resilient month in nearly a year during
January, helped by solid German output.
The euro rose more than 1 percent to hit 126.17
yen, its highest since April 2010, before pulling back to last
trade at 125.74 yen.
Against the dollar, the euro broke above an options
barrier at $1.3650 to hit $1.3675, its strongest since November
2011. It pared gains after the ECB announcement to trade at
$1.3650, up 0.5 percent on the day.
"The PMIs this morning continued to maintain a pretty strong
bid for the euro. It seems the path of least resistance is
towards the euro going higher," said Jeremy Stretch, head of
currency strategy at CIBC World Markets, adding the next target
for the euro is the psychologically important level of $1.37.
"We saw a little pullback (after the ECB announcement) but
it still seems markets are biased towards trying to test the
Banks will pay back another 3.5 billion euros of emergency
loans from the ECB next week, further deflating the central
bank's balance sheet at a time when the U.S. Federal Reserve and
Bank of Japan are pumping cash into their economies.
Although next week's repayment total is less than the market
had expected, prompting some investors to sell the euro, the
tightening monetary conditions were overall seen as positive for
the shared currency.
The yen remained under heavy selling pressure on
expectations of aggressive easing in Japan, with the dollar up
0.4 percent at 92.09 yen, having earlier hit 92.29 yen on
trading platform EBS, its highest since June 2010.
Traders said the yen's drop accelerated as market players in
Asia targeted and breached option barriers at 92.00 yen against
the dollar and 125.00 yen versus the euro.
Selling the yen has become a one-way bet with Japanese Prime
Minister Shinzo Abe heaping relentless pressure on the Bank of
Japan to ease monetary policy aggressively to jolt the economy
out of a decade-long malaise.
U.S. JOBS DATA
The next focus for investors is U.S. jobs data at 1330 GMT.
Traders said some investors were betting on a strong reading,
which could knock the safe-haven dollar against riskier,
growth-linked currencies, including the euro but boost it
further against the yen.
Reuters polling shows expectations centre on non-farm
payrolls adding 160,000 jobs and the jobless rate staying at 7.8
The U.S. ISM factory survey, a national report on the state
of American manufacturers, is also due at 1500 GMT.
John Hardy, currency strategist at Saxo Bank, said
currencies had already moved so much that a reading in line with
expectations could disappoint the market.
"Now the bar has been raised by these moves and we will need
to see a significant upside surprise to push it further. If the
data is in-line to softer and if ISM data doesn't impress, then
we could see a consolidation," he said.
The Australian dollar hit a one-month low of $1.0364
after Chinese PMI data for January came in slightly
below expectations while the Australian PMI was also weak.