FOREX-Dollar holds ground vs yen in pre-payrolls vigil

[hriti]

The dollar dipped against the yen but held above this week's seven-week low on Friday as investors hunkered down to await U.S. non-farm payrolls later in the day.

The market is uncertain how the dollar will react to the August non-farm payrolls report due at 1230 GMT, after it lost its toehold above 93.00 yen at the start of this week and hit its lowest since mid-July just above 91.90 on Thursday.

Traders in Tokyo have watched its fall and are wondering whether the jobs numbers will be a trigger for another drop touching off automatic sell orders expected from short-term speculators below 92.00 and around 91.50 yen.

"Payrolls could have a definitive impact," said David Watt, senior currency strategist at RBC Capital Markets in Australia.

"Preliminary indicators, however, are on balance consistent with the consensus. Hence, anything could be a surprise and the dollar could be in for a jolt either way."

A weaker-than-expected report could feed risk aversion, boost Treasuries and so aid the greenback.

A marked improvement could encourage risk-taking and aid commodity currencies like the Canadian and Australian dollars at the U.S. dollar's expense, or, confusingly, it could also be seen as a sign of relative U.S. economic strength and lift the dollar.

The latest forecast is for a drop of 225,000 in payrolls with the jobless rate at 9.5 pct [ECI/US]. But estimates range from a drop of 100,000 to as much as 365,000.

The dollar dipped 0.1 percent from late U.S. trading on Thursday to 92.59 yen JPY=, and was capped by offers between 92.80 and 93.05, market players said. The greenback hit a seven-week low of 91.94 yen on trading platform EBS on Thursday.

The dollar might rise to around 94 yen if the jobs data comes in strong, but any gains will probably be short-lived, said a trader for a Japanese brokerage.

"Even if the jobs data turns out to be pretty good, I think all that will happen is some short-covering and then that will be it," he said, adding that the dollar may then edge lower against the yen as it did after hitting an eight-week high of 97.79 yen on trading platform EBS in early August.

A trader at a Japanese bank said short-term players were short the dollar/yen but dollar buying in options-related hedging was slowing its fall -- and not everyone expected it to weaken.

"When you consider interest rate differences and economic and political fundamentals, there's no reason to buy yen -- that's what people say," the trader said.

Against a basket of currencies .DXY the dollar was steady at 78.440, after bouncing from a 77.997 low on Thursday.

Analysts at RBC said it sat at a critical juncture, defined by two trendlines. One, an ascending support off the July 2008 low at 77.90; the other a descending resistance off the early March high at 78.70.

These were converging fast toward 78.31, the 61.8 percent retracement of the rally from July 2008 to March 2009. The payrolls report could break the range.

The euro dropped 0.1 percent to 131.94 yen EURJPY=R, up from a dip to 131.01 yen on Wednesday, its weakest since mid-July. One trader said offers were expected at 132.40 EURJPY=R and above.

It was steady at $1.4252 EUR=, down from levels above $1.4300 on Thursday after European Central Bank President Claude Trichet sounded less hawkish than some expected.

The ECB held interest rates at a record low 1.0 percent and warned that now was not the time to withdraw state support as economies emerge slowly from recession.

Still, traders reported good support under $1.4200 which should hold into the jobs report, while offers were expected at $1.4300 and above.

On Friday, the Aussie dollar was steady at $0.8394 and dipped 0.1 percent to 77.67 yen AUDJPY=R.

It had been the biggest mover on Thursday, rising 0.6 percent to $0.8392 AUD=D4, helped in part by a bounce in stocks.

[hriti]

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[hriti]

The dollar on Monday fell to its lowest level this year against the euro as a rebound in U.S. stocks revived risk appetite and eroded the greenback's safe-haven appeal.

U.S. stocks edged higher, erasing early-session losses after a decision by the United States to impose special duties on Chinese tires sparked concerns of an escalating global trade dispute.

"It's the whole risk-on, risk-off story back again," said Jacob Oubina, currency strategist at Forex.com in Bedminster, New Jersey. "We had risk come off a little bit overnight with the China-U.S. trade news. Now (U.S. stocks) are managing to eke out a rally here and that's keeping the euro supported."

In late New York trading, the euro EUR= was up 0.4 percent on the day at $1.4622, rebounding from a session low of $1.4514. It climbed as high as $1.4652, the pair's highest level since December 2008, according to Reuters data.

[GoLearnForex]

wow, really thorough stuff here.

[hriti]

Yeah...Thanks dude!