The dollar held its ground against major currencies on Friday as investors waited for US jobs data later in the day to provide clues on how fast US interest rates would rise. So far this week, market expectations for an upbeat non-farm payrolls reading have supported the dollar, leading investors to bet on a faster pace of monetary tightening. The jobs data is due at 1330 GMT and expected to show that around 220,000 new jobs were created in February compared with 146,000 the previous month.
"The dollar is firm and we are in waiting mode," said Tim Fox, market strategist at National Australia Bank in London.
Some analysts said market expectations were now too upbeat and the dollar was at risk of disappointment.
"People are becoming too optimistic," said David Mann, foreign exchange strategist at Standard Chartered in London.
"There is a downside risk to the dollar if the jobs number doesn't live up to expectations," he said. Standard Chartered forecast payrolls growth at 250,000.
At 1240 GMT the dollar was firm at $1.3112 per euro. It was slightly stronger at 105.36 yen, but was unable to break 105.50, where Japanese exporters were seen ready to sell dollars.
Analysts said the yen was briefly pushed lower in Asian trade by rising oil prices, which have gained $7 over the last month to more than $53 a barrel. Japan buys all of its oil.
Ahead of the payrolls data, the dollar got a boost on Thursday when the employment component of the Institute for Supply Management's service sector index for February came in at 59.6, the highest since the survey started in 1997.
Jobs growth is seen as essential for the Federal Reserve to continue raising interest rates, while a better than expected payrolls number could prompt a more aggressive monetary tightening.
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