* Solid U.S. job data to cement case for a cut in Fed's
* Euro soft after Draghi dovish on ECB monetary policy
* Yen recovers from 6-week low on Japanese exporters buying
By Anirban Nag
LONDON, Sept 6 The dollar rose to a seven-week
high against the euro on Friday on expectations of an upbeat
U.S. jobs report that could pave the way for the Federal Reserve
to begin unwinding monetary stimulus this month.
In contrast, the euro was struggling not just against the
dollar, but against the yen and the British pound
after the European Central Bank head said the bank
was ready to cut official rates and inject more funds into the
system to keep conditions accommodative.
The two-year U.S. Treasury yield was trading near
its highest since May 2011, at 0.5100 percent, and the gap over
similar German bonds widened to its highest since mid-July.
The 10-year benchmark yield, which has a strong
correlation with the dollar index, touched 3 percent on
Thursday, its highest in more than two years.
U.S. non-farm payrolls data for August are due at 1230 GMT
and the report is the last one before the Fed meets later this
month to decide on stimulus withdrawal. Employers are expected
to add 180,000 jobs in August, and a higher figure would cement
the case for tapering this month.
The euro fell to $1.3106, a seven-week low with
traders citing a reported option barrier at $1.3100. The euro
was also hurt by below-forecast German industrial output data
. The dollar index was at 82.581, not far from a
recent seven-week peak of 82.671.
"A strong U.S. jobs report, say 200,000 or more, in our view
will drive U.S. yields higher and support the dollar," said
Bernd Berg, global currency analyst at Credit Suisse. "While it
will head higher against the euro, we think the impact will be
felt more in the dollar/yen."
He expected dollar to rise past 100 yen if the data beats
expectations. Rising U.S. yields would be expected to lure more
Japanese investors into Treasuries, he added.
The dollar hit a six-week high of 100.24 yen in
Asian trade before cautious Japanese exporters took that
opportunity to convert dollars to yen just in case the U.S.
payrolls data disappoints. The dollar was last trading 0.3
percent lower at 99.77 yen.
"Recent employment data have been robust, and should today's
reading come in in-line with or above expectations, markets will
cement the pricing of a September tapering, in our view,
supporting the dollar," Morgan Stanley said in a note.
"In our medium-term portfolio, we are long dollar/Swiss
franc, dollar/Canadian dollar and dollar/yen."
One factor that could act against the dollar and in favour
of the yen, though, is a possible fall in Japanese shares if
Tokyo is not selected by the International Olympic Committee
this weekend to host the 2020 Summer Games. A drop in Japanese
stocks benefits the yen, since the currency has an inverse
correlation with the Nikkei
Near-term focus was on the U.S. jobs data with a slew of
recent data bolstering the case for a strong number.
The prospect of the Fed withdrawing some of the flood of
cheap dollars which has benefited emerging markets in recent
years has prompted a round of soul-searching and policy
discussions among leading developing nations.
More gains for the dollar could spell trouble for emerging
market currencies, Credit Suisse's Berg added.