The dollar edged down on Friday as traders awaited a monthly US labour market report for clues on whether the world's biggest economy will bounce back after a lacklustre second quarter. The greenback was flat on the week against a basket of major currencies, having fallen 2 percent last week - its worst showing since April - on a much-weaker-than-expected set of US growth data and on a statement from the Federal Reserve that failed to give a clear signal of a near-term rate rise.
On Friday it inched down 0.1 percent to 95.660, having hit a five-week low of 95.003 at the start of the week. Sterling edged up 0.2 percent to $1.3137, finding a foothold following a 1.6 percent fall on Thursday after the Bank of England surprised markets with a larger-than-expected monetary stimulus package.
The US non-farm payrolls report is due at 12.30 GMT, with economists polled by Reuters expecting 180,000 jobs to have been added in July. "Uncertainty about the underlying trend of growth is high enough to exaggerate the market reaction either way," said Societe Generale macro strategist Kit Juckes. A strong payrolls reading could help the dollar by reviving expectations that the Fed could raise interest rates by year-end - a scenario that had been discarded in the days that followed Britain's shock vote to leave the European Union in June.
Markets are pricing in just a 32 percent chance of a Fed rate hike by the end of the year, according to CME FedWatch. "It (the payrolls report) is particularly in focus because of the weak GDP data last week, which led to a lot of disappointment and also the repricing of rate expectations," said Commerzbank currency strategist Esther Reichelt in Frankfurt.
"Now everyone is waiting for some signal of whether the US economy is really in such a bad state, or whether there is hope that Q3 is going to be better." Against the yen, the dollar slipped 0.2 percent to 101.05 yen, not far from the greenback's three-week low of 100.68 yen set on Tuesday. Data released on Friday showed the Swiss National Bank's foreign exchange reserves rose to a record high in July, highlighting the central bank's struggle to keep a cap on gains in the Swiss franc. The franc fell 0.3 percent to 1.0859 francs per euro.
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