December 3, 2010 / 12:35 PM / 10 years ago

FOREX-Euro edges up on ECB bond buys; payrolls eyed

* Euro up 0.2 pct to $1.3253 EUR=

* U.S. nonfarm payrolls seen rising by 140,000

* ECB bond buying, euro zone data underpins euro

* Euro downtrend still seen intact over medium-term

(Adds quote, updates prices)

By Tamawa Desai

LONDON, Dec 3 (Reuters) - The euro edged up on Friday as the European Central Bank continued buying Portuguese and Irish government bonds, easing euro zone debt concerns and helping the currency rebound from a 2-1/2 month low hit earlier this week.

But price movements were limited ahead of U.S. payrolls data, especially after a firm ADP jobs report earlier in the week, and a surprisingly strong U.S. housing number on Thursday adding to views of a U.S. economic recovery.

“Expectations are creeping up so a (nonfarm payrolls) number bigger than 150,000 would be needed to get any market reaction,” said Ian Stannard, senior currency strategist at BNP Paribas.

He said the dollar/yen pair would be most sensitive to the data, with a recent high around 84.40 yen as a level to watch.

A further rise above 3 percent in 10-year U.S. Treasury yields US10YT=RR would also boost the dollar against the Japanese unit, he added.

A Reuters poll showed U.S. nonfarm payrolls would increase by 140,000 in November, rising for the second month amid strong gains in private hiring. [ID:nN30116474]. The jobless rate is expected to remain at 9.6 percent.

The dollar changed hands at 83.50 yen JPY=, down 0.4 percent from late U.S. levels by 1205 GMT, off Monday's two-month high of 84.41 yen. Strong support was seen at the top end of the pair's Ichimoku cloud at around 83.18.


Euro zone debt timeline:

Euro zone crisis coverage

Graphic on debt crunch:

U.S. payrolls preview



The euro was underpinned as risk premiums on government bonds issued by euro zone periphery states fell on Friday, with further bond buying by the European Central Bank reassuring investors. [GVD/EUR]

A rise in euro zone service sector activity [ID:nSLA2NE6K0], retail sales [ID:nBRL3NE694] and the Bundesbank raising Germany’s growth forecasts for this year [ID:nFAE005847] also supported the single currency, as investors’ immediate concerns about the euro zone were alleviated.

The euro rose 0.2 percent on the day at $1.3252 EUR=, remaining above a 2-1/2 month low of $1.2969 hit on Tuesday after massive selling in euro zone periphery government bonds.

Large euro/dollar option expiries at $1.3200 and $1.3250 were slowing the rally, while the technical picture was helped by the euro holding above its 200-day moving average at $1.3123.

But many analysts were not persuaded the euro had turned a corner.

“The ECB has done a good job in reassuring the markets this week and the euro zone PMI this morning has also helped, but the euro is not out of the woods yet,” said Jane Foley, senior currency analyst at Rabobank. (Additional reporting by Neal Armstrong; editing by Stephen Nisbet and Toby Chopra)

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