the dollar on Friday but dropped to a two-week low against the euro as a fall in the US unemployment rate to a near-four year low lifted riskier currencies. The euro outperformed the pound, which was under pressure after weaker UK data this week left open the possibility that the Bank of England will opt to extend asset purchases under its quantitative easing programme next month. The US economy added 114,000 jobs in September, in line with expectations, but sizeable upward revisions for previous months meant the unemployment rate dropped to 7.8 percent, its lowest since January 2009. This helped sterling rise as high as $1.6218. More gains could see it target the Sept. 28 high of $1.6273 and the 2012 high of $1.6310 reached a week earlier. The pound rose in tandem with equities and currencies such as the euro and the Australian dollar, but analysts said gains would be limited because the jobs figures gave few clues on whether the Federal Reserve would ease monetary policy further. "The movements were small because the U.S. data was close to expectations. People were looking for clues on where the Fed goes from here and there isn't much to go on in this release," said Adam Cole, currency strategist at RBC. The euro rose 0.2 percent to 80.64 pence, leaving it on track for its biggest weekly gain in two months. More gains would take it towards chart resistance at the mid-September peak of 81.14 pence. But traders said it may be influenced by a reported options expiry due on Friday at 80.50 pence, which could keep it close to that level. CMC Markets analyst Michael Hewson also said any gains for the pound against the dollar would be limited while it remained below $1.6300. "That's a significant top, it's this year's high and also the high we saw in September. There's definitely a barrier there." BOE EASING SPECULATION A composite of activity data released this week suggests the UK economy grew only marginally in the third quarter with the construction sector still contracting and the dominant services sector growing much more slowly than anticipated. Market watchers said this could boost speculation BoE policymakers will opt to extend their asset purchase programme in November after they left policy unchanged this week - which would keep the pound weak. "We continue to expect the (BoE's Monetary Policy Committee) to loosen policy at its November meeting, with a 50 billion pound extension of asset purchases and, more speculatively, a 25 basis point cut in Bank Rate," Barclays said in a note. "Our reading of the August Inflation Report was that it indicated a bias towards further loosening and we believe the economic outlook has deteriorated since then.

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