Friday December 5, 2014 - 00:52:17 GMT
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Reuters - www.reuters.com
FOREX-Euro up on short-covering rally post-ECB, U.S. payrolls next
* Euro back near $1.2400, off two-year lows around $1.2279
* More dovish words but no action from ECB
* U.S. nonfarm payrolls next major event risk
By Ian Chua
SYDNEY, Dec 5 (Reuters) - The euro started trade on Friday higher against most of its peers but could struggle to extend gains if U.S. employment data due later in the day re-energise dollar bulls.
Investors were forced to trim bearish positions in the common currency overnight after the European Central Bank (ECB) disappointed some by not immediately expanding its stimulus program.
As a result, the euro jumped to $1.2457 from a two-year trough around $1.2279. It has since steadied at $1.2380.
It climbed towards a six-year peak of 149.12 yen set on Nov. 20, rising as far as 148.95 before losing a bit of steam to last fetch 148.27 yen.
The short-covering rally in the euro knocked the dollar index to 88.633 from a 5-1/2 year high of 89.122. Against the yen, the greenback popped above 120.00 for the first time in over seven years, but has since drifted back below the big figure.
If there was one reason tempering a more aggressive squeeze in short euro positions, it would have been ECB President Mario Draghi's promise to decide early next year whether to take further action to revive the euro zone economy.
Importantly, Draghi also signalled that he would not allow opposition from Germany or anyone else to stop it.
"Taking on board likely further falls in headline HICP, Draghi's comments give succour to the idea that further policy moves are coming at the next couple of meetings," said Gavin Friend, senior markets strategist at National Australia Bank.
"We think these are likely to include corporate bond and sovereign QE and possible adjustments to the 'intended' size of balance sheet expansion - QE that will in time unseat the euro further."
For now though, all eyes will be on U.S. payrolls due at 1330 GMT. Analysts polled by Reuters expect employers added 230,000 new jobs to their payrolls last month and for the unemployment rate to remain unchanged at 5.8 percent.
Any upside surprise will further highlight the diverging outlook between the United States and Europe, giving the market a fresh excuse to buy the dollar against the euro.
Another standout performer overnight was the Australian dollar, which continued to drift lower in the wake of this week's disappointing local economic data.
The slowdown in growth has prompted a string of analysts from Deutsche to Westpac to call for interest rate cuts next year. As a result, the Aussie slid to a fresh four-year trough of $0.8356 and was on track to end lower for a third straight week. (Editing by Dan Grebler)
© Thomson Reuters 2014. All rights reserved.
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