Reuters: US Dollar Report: FOREX-Dollar off highs before U.S. jobs data

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FOREX-Dollar off highs before U.S. jobs data Nov 8th 2013, 11:59 Fri Nov 8, 2013 6:59am EST * Euro steadies after shock ECB rate cut, French S&P downgrade * Traders cautious about dollar before U.S. jobs data * In-line jobs reading could see dollar give up recent gains By Anirban Nag LONDON, Nov 8 (Reuters) - The dollar steadied at slightly lower levels against the euro on Friday, as some positioned for a soft U.S. jobs report that could encourage the Federal Reserve to keep monetary policy ultra-loose. Gains in the euro were limited as asset managers and other investors sold it at higher levels after the European Central Bank's surprise interest rate cut on Thursday and a downgrade to France's credit rating on Friday. A strong U.S. non-farm payrolls report would increase expectations the Fed will start tapering its bond buying programme sooner rather than later, particularly after Thursday's robust U.S. growth figures. But many are cautious about buying the dollar given the risk of a soft jobs reading due to last month's 16-day government shutdown. That could see the dollar index give up some of its lofty gains, having hit a near two-month high of 81.46 on Thursday. A dip in the dollar would also boost the euro, which is on track for its second week of losses. "An in-line reading for the U.S. jobs number will see the dollar come off," said Neil Mellor, currency strategist at BNY Mellon. "A better-than-expected number will give the dollar a boost, but recent commentary from the Fed suggests that they are not in a hurry to withdraw stimulus." Economists polled by Reuters estimate the unemployment rate rose to 7.3 percent in October while non-farm payrolls grew by 125,000 jobs. Against the dollar, the euro was flat at $1.3425, recovering from a seven-week low of $1.3295 struck on Thursday. The euro was hit earlier after Standard & Poor's downgraded France's credit rating to AA from AA+. The euro fell sharply on Thursday after the ECB cut borrowing costs to a record low of 0.25 percent and said it could reduce further to prevent the euro zone's recovery from stalling following a sharp drop in inflation. "Given the ECB's view of a prolonged period of low inflation, any further slowing in CPI will raise the threat of negative deposit rates - which will be a big negative for the euro," said Chris Turner, chief currency strategist at ING. Money markets and the currency options market are suggesting the euro will grind lower in the near term as it loses its yield advantage over other major currencies. Citi put a sell recommendation, targeting a drop to $1.3050. "We are adding a short euro/dollar position in cash to our leveraged trade ideas portfolio. Following the ECB rate cut investors will look for indications that more policy activism could be on the cards before long," analysts said in a note. Link this Share this Digg this Email Print Reprints

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