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Traders said a non-farm payrolls report which is in line with
expectations, or even a slightly better-than-expected reading,
would be unlikely to alter expectations that the Federal Reserve
will not raise interest rates later this month.
For the dollar to get a boost, not only would the report have to
show a huge rise above the 220,000 consensus figure, but wages
too would need to register a sharp uptick, which could bring a
hike this month back to the table, analysts said.
Expectations of a rate hike by the Fed in September have waned
as a slowdown in China has brought increased market volatility
across asset classes. That has caused the dollar to struggle in
recent weeks, especially against the yen.
"The bar for a dollar-positive surprise is likely higher --
above 230,000 -- given concerns that ongoing volatility will
prevent a September hike," said Josh O'Byrne, currency
strategist at Citi. "(A reading) below 180,000 could be seen
taking September off the table."
The dollar was down 1 percent at 118.85 yen, on track for its
biggest weekly loss since August 2013.
The yen also rose against the euro, which had come under broad
pressure after the European Central Bank (ECB) gave a sobering
assessment of the euro zone economy and suggested it may have to
beef up its already massive stimulus program.
The euro dropped to a four-month low of 132.55 yen. The single
currency, though, stabilized against the dollar, rising 0.1
percent to $1.1135, supported by a steady unwinding of
euro-funded carry trades as stocks struggled.
Japan's Nikkei fell to a seven-month low, while European stocks
were in the red, prompting traders to unwind carry trades,
funded in the low-yielding euro and the yen. Traders said unless
volatility faded, the euro would side-step the ECB's easy
monetary policy stance and continue to benefit from souring risk
sentiment.
"Nowadays, volatility is too high to see euro zone-based
investors exporting capital in sufficient quantities to weaken
the euro. Hence, the ECB measure may limit the euro's upside but
does not open downside potential," Morgan Stanley said in a
note.
The euro hit a two-week low against the dollar on Thursday after
ECB President Mario Draghi said the bank's bond-buying program
may run beyond September 2016 and that its size and composition
may be adjusted.
(Editing by Catherine Evans and Mark Potter)
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