Friday February 2, 2007 - 11:38:29 GMT
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Reuters - www.reuters.com
FOREX-Dollar steadies vs euro before payrolls
FOREX-Dollar steadies vs euro before payrolls
Fri Feb 2, 2007 6:23am ET147
(Changes byline, adds quotes, updates prices)
By Toni Vorobyova
LONDON, Feb 2 (Reuters) - The dollar steadied against the euro on Friday, with investors reticent to take positions before key U.S. jobs and sentiment data.
The yen gained versus major currencies with investors getting worried that European officials will initiate discussions on the Japanese currency's weakness at next week's Group of Seven meeting.
January's U.S. non-farm payrolls report, due at 1330 GMT, will be scanned by investors for evidence to reinforce a solid growth outlook and the Federal Reserve's steady stance on rates.
Economists expect the data to show 149,000 jobs added in January after a rise of 167,000 the previous month.
"Markets are looking for quite a strong outturn for payrolls. We question whether or not they are being too optimistic, especially if the cold spell that we saw in the U.S. led to some reduction in construction payrolls," said Tom Vosa, head of market economics at NAB.
By 1104 GMT, the dollar was steady at $1.3018 to the euro, having traded within a range of just 14 ticks since the start of the day. It was up 0.2 percent at 120.92 yen , but down from the four-year highs of 122.19 yen struck earlier this week.
The euro was also 0.2 percent firmer at 157.53 yen , off a record peak of 158.61 struck last week.
As well as payrolls, investors are awaiting University of Michigan sentiment data at 1500 GMT, following figures on Thursday showing an unexpected slide in manufacturing activity last month.
There is also some downside risk to payrolls as the ISM manufacturing employment index showed contraction.
"Manufacturing jobs were probably a drag on payrolls, after yesterday's weaker than expected January ISM. Bearish for the USD will be a slight drop in average hourly wage growth from 4.2 percent year-on-year to 4.1 percent, which will align with the less hawkish tone on inflation risks in Wednesday's (Federal Reserve) statement," RBC Capital Markets said in a client note.
INCREASING G7 FOCUS
Influence from the U.S. data could well be capped, analysts say, as market attention turns to what might be said about the struggling yen at next week's G7 finance ministers' meeting.
The yen's 16 percent slide in the past three years to record lows against the euro has grabbed the limelight before the Feb. 9-10 gathering, as European officials have sought to make the currency's woes a major topic of discussion. Continued...
But Japanese and U.S. officials have played down a focus on the yen, with U.S. Treasury Secretary Henry Paulson saying on Thursday he was satisfied the yen's value was set by markets and that he was looking at the yen more carefully "only because of the publicity coming out of Europe".
"Although the risk of a strongly worded statement is fairly small because you'll never get agreement (on the yen). Nonetheless particularly from a European perspective the pressure on the Japanese will be higher," said NAB's Vosa.
"The risk is that we will see over the course of next week a lot of unwinding of existing carry trades, which leaves the Aussie and the kiwi most vulnerable, and perhaps the rand."
Japan's low interest rates -- 0.25 percent compared with 3.5 percent in the euro zone and 5.25 percent in the United States -- have given market players the green light to borrow yen for funds to buy higher-yielding currencies in the carry trade.
Japanese investors have also sought better returns elsewhere, leading to a large outflow of cash from the country.
Â© Reuters 2007. All Rights Reserved.
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