* Dollar inches lower after hitting 10-week high vs yen
* US ADP employment report, payrolls on Friday key to
* Euro resilient as no easing expected from ECB on Thursday
* Kiwi falls almost 1 percent from long-term highs
(Recasts, updates prices, adds new comments)
By Patrick Graham
LONDON, April 2 The dollar and euro backed off
after a surge higher against the yen on Wednesday, with the
chances of a breakout of long-held ranges looking dependent on
U.S. jobs data due later in the session and on Friday.
The major currency pairs have all been stuck in tight ranges
since mid-February, bets for a run higher by the dollar having
been thwarted by a combination of nerves over China and some
worse than expected U.S. data.
That has begun to turn around in the past couple of weeks
and dealers are beginning to speculate non-farm payrolls numbers
at the end of this week may have the potential to turn the
dollar sharply higher.
The heart of that argument is the assumption that, should
the numbers begin to look more robust, U.S. interest rates will
be raised early next year while those in Europe and Japan will
stay flat or be suppressed further.
"When we had that signal from (U.S. Federal Reserve chair)
Janet Yellen that rates could rise early next year, the line for
many was that they wanted more confirmation before really
betting on it," said a dealer with one large U.S. bank in
"It is just possible that the next three days could provide
that, starting with the ADP numbers later today."
Figures from the payrolls processor, seen as a good guide to
the official non-farm numbers on Friday, are expected to show
the U.S. private sector created another 195,000 jobs last month.
After gaining as much as 0.3 percent against the yen in
morning trade, both the euro and dollar had retreated to be
almost unchanged at 143.03 yen and 103.70 yen
The euro was broadly flat against the dollar but is looking
more robust than it did a week ago, when it was struck by hints
that the Bundesbank's resistance to outright money-printing by
the European Central Bank may be fading.
Several ECB officials have since emphasised the temporary
nature of current low inflation - 0.5 percent in March - and
that has supported expectations the bank will do nothing when it
ends its monthly policy meeting on Thursday.
"I wouldn't be surprised if the euro continues to do quite
well," said Ian Stannard, a currency strategist with Morgan
Stanley in London.
"We see signs of more growth in France and Italy, which is
encouraging overall and it seems like the ECB is not fazed by
this sort of inflation. It will need a bigger shock to get them
The morning's biggest loser in Europe was the New Zealand
dollar, down almost 1 percent on the day to $0.8564
after hitting a 2-1/2-year high of $0.8702 on Tuesday.
Dealers broadly put that move down to profit-taking on the
back of a slightly more negative dairy auction after a run
higher for the kiwi since the second half of last year.
The yen, the currency most used by investors for funding
carry trades which borrow in one unit to buy another slightly
higher-yielding one, is also being weakened by anticipation that
the Bank of Japan will have to ease policy further.
Oil prices trading just off 5-month lows and a survey that
showed corporate expectations for inflation next year below the
BOJ's 2 percent target all added to pressure on
the bank when its U.S. counterpart is reining in money-printing.
"We're in an environment where the yen will come under some
pressure against the dollar," said Morgan Stanley's Stannard.
"We've had some fairly positive signs out of Asia on growth
and that puts the yen on the back foot. China is a factor and if
the U.S. data comes in strong that will give the dollar a
(Editing by Toby Chopra)