* Euro hits 2-1/2-month peak against dollar
* ECB disappoints bears, euro seen rising to $1.40
* Dollar/yen slips from 5-week high
* Expectations for U.S. jobs lowered by soft ADP, ISM
By Anirban Nag
LONDON, March 7 The euro's raced to fresh 2014
highs against the dollar on Friday with more gains likely if a
key U.S. jobs report reflects the soft patch the world's largest
economy has hit due to the cold weather.
The dollar slipped from a five-week high against the yen
with its near-term fortunes hinging on the non-farm payrolls
report, due at 1330 GMT. The data is likely to show job growth
in the United States picked up enough in February to encourage
the Federal Reserve to continue scaling back stimulus.
A Reuters poll of economists found employers were expected
to have added 149,000 workers to their payrolls last month.
But analysts said investors may be bracing for a weaker
reading following the soft ADP private sector jobs report and
ISM services sector survey released earlier this week.
The euro hit a 2-1/2 month high of $1.3874 in early
European trade - a 2014 peak - with investors targeting the Dec.
27 high of $1.3894 that would take the currency to its highest
since late 2011.
The euro has made broad based gains after the ECB on
Thursday decided to stand pat on policy and held off from fresh
President Mario Draghi told a news conference that economic
conditions in the region did not require a shift in monetary
policy. He also clarified that the euro's rise has only reduced
inflation by 0.4 percentage points, comments which analysts said
will likely to see more upside for the currency.
"The ECB was quite disappointing to a lot of euro bears,"
said Yujiro Gato, currency strategist at Nomura. "We do not rule
out a move towards $1.40 by the euro in the coming weeks given
the ECB is unlikely to ease policy anytime soon."
DOLLAR INDEX STEADY
Despite losses against the euro, the dollar index,
which measures its value against a basket of major currencies,
stood broadly steady at 79.619. It fell to a four-month low of
79.59 on Thursday on the euro's post-ECB surge.
Traders said they were geared up for a soft number due to
weather disruptions and any number below 100,000 fresh jobs
being created, could see the dollar drop against the yen.
"There's a very wide range on this one now. I think the
market has already priced in a lower number," said Jeffrey
Halley, FX trader for Saxo Capital Markets in Singapore,
referring to the U.S. non-farm payrolls data.
"I think it would have to come in well under 100,000 for it
to have any significant downside effect on dollar/yen," he
The dollar eased 0.2 percent to 102.91 yen. Earlier,
the dollar touched a high of 103.17 yen, matching a five-week
high that had been set on Thursday.
"The market could treat the consensus figure of 150,000 jobs
as a positive surprise. Considering the severe winter
conditions, a number through to 120,000 may not be considered a
letdown," said Ayako Sera, senior market economist at Sumitomo
Mitsui Trust in Tokyo.
A solid U.S. non-farm payrolls report would help the
greenback consolidate its position above 103 yen but investors
will be wary of pushing too far as the crisis in Ukraine appears
far from over, Sera at Sumitomo Mitsui Trust said.
The yen, along with the Swiss franc, is considered a safe
haven currency and received a boost earlier this week when
tensions in the Crimea heightened.