RTRS:FOREX-Euro dips vs dollar ahead of U.S. jobs data
* Euro near 5-week low vs dollar
* Euro also near record lows vs Australian, NZ dollars
* ECB rate cut further dampens euro appeal
* Strong U.S. jobs reading could boost dollar
By Jessica Mortimer and Michelle Chen
LONDON, July 6 (Reuters) - The euro stayed close to a
five-week low against the dollar on Friday after sharp falls the
previous day and as markets await U.S. jobs data, where a strong
number could lessen the chances of the Federal Reserve opting
for more quantitative easing.
A day after the European Central Bank cut interest rates,
further dampening the euro's appeal, and China and the Bank of
England also announced more monetary easing, analysts said signs
of improvement in the U.S. economy would bolster demand for the
dollar.
"If non-farm payrolls are strong enough to suggest there
will be no QE (quantitative easing) from the Fed, the dollar
will strengthen. If they are weaker then the dollar will fall as
the Fed will just be playing catch-up with the rest of the
world," said ING head of currency strategy Chris Turner.
The data is due at 1230 GMT.
The U.S. economy is expected to have added 90,000 new jobs
last month, compared with 69,000 in May, though some analysts
said this week's strong private payrolls data suggest the
reading could be better than this.
Goldman Sachs raised its forecast to a 125,000 gain from
75,000 previously.
The euro was down 0.1 percent at $1.2375, near a
5-week low of $1.23638 hit on Thursday. A break below there
would leave it on course for a move towards the two-year low of
$1.2288 struck on June 1.
The dollar index, which measures the dollar's value against
a basket of currencies, was up 0.1 percent at 82.872. It
rallied to 82.930 on Thursday on the back of euro weakness, a
high not seen since early June.
"Politically and economically, it is not the environment for
the euro to rally ... In a week or a month's time, it can easily
get back down towards below $1.2280 and maybe even head towards
$1.20," Kathleen Brooks, research director at FOREX.com said.
She added that even if the U.S. jobs data was weak, the U.S.
Fed may still not choose to adopt more quantitative easing,
adding there were questions over the effectiveness of QE in
boosting the economy.
Against the yen, the dollar was barely changed at 79.84 yen
having reached a two-week high of 80.099 on Thursday.
Traders reported sell orders around 80.10 which may cap gains.
MORE EURO WEAKNESS
The ECB cut its main interest rate to 0.75 percent and the
deposit rate to zero, reducing the incentive for investors to
hold a currency already beset by debt problems.
Many analysts say the ECB's easing this week will lead the
euro to take on the role of a funding currency - used to finance
investments in higher-yielding assets - meaning it could
struggle to make ground even when share prices rise.
"A weaker euro has to be one of the least costly solutions
to the euro zone crisis," ING's Turner said, adding he expected
the euro to see an "orderly decline" towards $1.15 by year-end.
A Reuters poll conducted after the ECB rate cut showed
economists expect more measures from the central bank in the
coming months, possibly including another round of cheap,
long-term loans for banks.
The euro also stayed near record lows hit on Thursday versus
the Australian and New Zealand dollars .
Against the Swiss franc, the euro was at 1.2007 francs
, continuing to hover just above the 1.20 floor for
the euro/Swiss franc rate imposed by the Swiss National Bank
last year in an attempt to keep its economy competitive.
Many in the market believe the SNB will struggle to maintain
the cap, with data on Friday showing the SNB's foreign exchange
reserves jumped 19 percent in June as the euro zone crisis
forced it to intervene heavily.
The higher-yielding Australian dollar was down 0.2 percent
against the U.S. dollar at $1.0262, off a two-month
high of $1.0330 hit on Thursday following a surprise interest
rate cut in China, Australia's single largest export market.
