The dollar drifted near recent record lows against the euro and five-year lows against the yen on Friday ahead of key US jobs figures. The market is looking to the November jobs report at 1330 GMT to gauge sentiment towards the dollar, which made a tentative recovery earlier in the session but failed to sustain its gains.
An upbeat payrolls reading could highlight the relative strength of the US economy and harden the case for higher interest rates, making US assets more attractive to investors.
But many analysts said that they expected the dollar's downtrend to remain intact as investors focused on structural weaknesses in the world's largest economy.
"There maybe some short-term reaction to these numbers but at the end of day we will trend higher in euro/dollar. People remain bearish and the market is not really trading on growth differentials," said Michael Klawitter, senior currency strategist at West LB.
The dollar hit lifetime lows against the euro and 5-year lows versus the yen in early trade on Thursday but later rebounded on nervousness that market positions had become extreme and central banks could take action to curb the greenback's slide.
The dollar has fallen for 10 consecutive weeks against a basket of major currencies, rattled by concerns about the US current account deficit and the view that Washington is happy to see a weaker dollar to plug the gap.
The dollar stood at $1.3315 to the euro at 1258 GMT, down 0.3 percent from late New York levels having recovered a cent from record lows hit the previous session. Against the yen, the dollar was slightly lower at 103.02.
The dollar hit session lows after weaker-than-expected jobs data from Canada sparked fears that the upcoming jobs data would fall short of expectations and result in more dollar selling.
A strong US jobs report would cement the case for further rate hikes by the US Federal Reserve.
Economists' median forecast is for 180,000 new jobs to have been generated in November, below October's 337,000 gain but still enough to persuade the Federal Reserve to raise rates again later this month.
The dollar failed to gain on surprisingly strong job figures for October, overwhelmed by concerns about the United States' ability to finance its gaping current account deficit.
"Whatever the number, it will give an indication of whether the market is still preoccupied with structural concerns ... or whether will we will go back to cyclical factors," said Michael Metcalfe, senior strategist at State Street.
Japanese and eurozone policymakers have expressed concern that the dollar's rapid fall could damage their economies and some traders said the threat of central bank intervention was also keeping the dollar off its lows.
Britain's Finance Minister Gordon Brown told Reuters that foreign exchange moves were adding to the risks facing the global economy.
Japan Finance Minister Sadakazu Tanigaki reiterated on Friday that the yen's recent rise had been rapid and Japan would take action if needed.
Data out of the eurozone highlighted how the strong euro had affected firms' competitiveness with the Reuters Eurozone Business Activity Index falling to 52.6 in November, its lowest in 15 months.
European Central Bank President Jean-Claude Trichet said on Thursday that recent moves in currency markets were unwelcome but gave little indication that intervention to weaken the euro against the dollar was on cards.