Dollar dips before U.S. payrolls data

[March 04, 2016]  By Patrick Graham

LONDON (Reuters) - The dollar lost more ground against the euro on Friday after its biggest decline in a month a day earlier, with markets on edge before official U.S. jobs numbers due later in the session.

The U.S. currency has gained against the euro for the past month, helped by a revival of interest-rate carry trades, in which investors borrow in euros to buy other currencies with higher interest rates.

A solid payrolls report would probably give the dollar further support, but a breakdown of the ISM sentiment survey on Thursday suggested the data would fall short of the 190,000 new jobs that analysts forecast in a Reuters poll.

Citi, BNP Paribas and Societe Generale, among others, warned about the chances of another rebound for the euro. It was up 0.3 percent at $1.0984 by late morning in Europe.

"While the latest run of data has been surprisingly strong, we suspect that markets may still be waiting for some 'Eureka!' moment before formally adopting a more bullish US view," ING strategist Viraj Patel said.

The dollar also lost 0.1 percent against a basket of currencies. Thursday's 0.8 percent fall against the euro took it into negative territory for the week.

Some traders and analysts said the euro was drawing support from a perception that euro rates already factor in more easing by European Central Bank policymakers next week.

"Even if they were to cut by 20 basis points and introduce tiering of rates, it would be hard for the euro or the bond market to go further than where they are," BNP Paribas strategist Sam Lynton Brown said. "We think there is a risk that the euro bounces. Our top way to play this is buying the euro against the yen."

Stock markets have been more bullish since the end of February, and commodity and growth-linked currencies such as the Canadian and Australian dollars have benefited.

One risk to that brighter mood is the National People's Congress - an annual meeting of China's parliament - that begins on Saturday.

The Aussie rose just under half a percent to a more than six-month high of $0.7389. The Canadian dollar dipped to trade around half a cent off a three-month high of C$1.3372 per dollar it hit on Thursday.

(Additional reporting by Shinichi Saoshiro; Editing by Larry King)

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