Dollar remains weak in London

The dollar hovered near a two-week low versus the euro on Friday as investors braced for US non-farm payrolls data and mulled the prospects for higher euro zone interest rates sooner rather than later.
Economists surveyed by Reuters expect to see a loss of 143,000 US jobs in September as lay-offs in the wake of Hurricane Katrina affect nation-wide figures. The data is due at 1230 GMT.
"Market positioning is fairly neutral going into payrolls," said Adrian Foster, head of currency strategy at Dresdner Kleinwort Wasserstein in London.
At 1140 GMT, the euro was down 0.25 percent at $1.2150, off a two-week high of $1.2205 hit in US trade and well above the three-month low of $1.1900 struck earlier in the week.
The dollar bought 113.38 yen, up 0.18 percent, but about one yen below the 16-month high of 114.41 yen hit this week.
The dollar posted its biggest one-day loss versus the euro in over three years on Thursday as investors sold the currency partly on the view that its recent rally on expectations of higher US interest rates had been overdone and on fears that stronger inflation could crimp growth. The euro also got a boost after tougher talk by the European Central Bank on inflation.
The ECB left its key rate unchanged at 2.0 percent as expected on Thursday, but its President Jean-Claude Trichet said that strong vigilance against inflation was essential and the central bank was ready to raise rates should problems worsen.
"The reverberation from the ECB is continuing to be felt in the market," said Gavin Friend, currency strategist at Commerzbank in London. "The higher (US) rate theme is offset by fears that inflation may move higher and growth may move lower."
Growing hopes that German Chancellor Gerhard Schroeder's Social Democrats and Angela Merkel's conservative Christian Democrats are finally moving towards forming a "grand coalition" also helped the euro, traders said.
The dollar had risen until early this week, prodded higher by a chorus of comments from Fed officials expressing concern about US inflation. These supported expectations the central bank would stick to its 15-month run of credit tightening.
Dallas Fed President Richard Fisher was the latest to speak up, but his cautionary comments about inflation on Thursday triggered little reaction in the dollar.
The market showed no response to news that New York authorities had stepped up security across the city after officials received what they described as a specific and credible threat of an attack on the subway system in the coming days.