Dollar shaky in Asia

The US dollar was on the back foot in Asia on Friday after suffering its biggest one-day decline in three years against the yen as market players unwound their bullish bets on the greenback ahead of a closely watched US jobs report. After falling as much as 3 percent to a seven-week trough of 95.90 yen on Thursday, the greenback was last trading at 96.85, flat on late US levels.
The dollar pared earlier deeper losses after Japan's Government Pension Investment Fund (GPIF) said it would increase its holdings of riskier assets such as foreign equities, while cutting down on domestic government bonds. The GPIF's decision could support sentiment in Japanese equities, which have recently come under heavy selling pressure with the benchmark Nikkei stock average falling sharply on China growth worries and Fed stimulus jitters. "Japanese exporters were hoping the dollar-yen would stay in a range between 95 to 100, so when it breaks 97 they panic a bit. They haven't hedged up to now so they're worried that it won't recover to this rate for a while," said Yoshio Takahashi, currency strategist at Barclays.
But the dollar index has dived since hitting a nearly 3-year high of 84.498 on May 23 as some traders cut their dollar-longs after a mixed batch of recent economic reports raised concerns that Friday's jobs data will disappoint. Against a basket of currencies, the dollar was last at 81.637 after reaching a three-month low of 81.077 on Thursday. Barclays Capital analysts said the market seemed to be positioning for a weaker number of payroll increases than its own forecast of 175,000, against an average 170,000 expected by economists polled by Reuters.
"We think that an outturn close to our forecast could lead to broad USD strength, especially versus low-carry currencies." Against the euro, the greenback steadied after losing 1.2 percent on Thursday to a three-month low of $1.3306. It was last at $1.3251, little changed from late New York levels. Market participants said the euro's move was more driven by the dollar's weakness against the yen than the European Central Bank (ECB)'s widely expected decision to leave its benchmark rate at a record low 0.5 percent.
On Friday, the euro steadied against the yen at 128.48 after brushing a five-week low of 127.53 on Thursday. The recent rise in the yen threatens to undermine the Bank of Japan's stimulus efforts, which have weakened the Japanese currency, helping exporters' overseas revenues up. The yen gained 0.9 percent against the Australian dollar to 91.40, after rising as high as 91.20, a level not seen since January 9. The Aussie also resumed its recent slide after the US dollar's broad weakness granted it a bounce from a 20-month low of $0.9435 on Thursday. On Friday it was back down 0.6 percent at $0.9504, within reach of its 2011 trough of $0.9388.