The dollar dipped against the yen but held above this week's seven-week low on Friday as investors hunkered down to await US non-farm payrolls later in the day. The market is uncertain how the dollar will react to the August non-farm payrolls report, after it lost its toehold above 93.00 yen at the start of this week and hit its lowest since mid-July just above 91.90 on Thursday.
Traders in Tokyo have watched its fall and are wondering whether the jobs numbers will be a trigger for another drop touching off automatic sell orders expected from short-term speculators below 92.00 and around 91.50 yen. A weaker-than-expected report could feed risk aversion, boost Treasuries and so aid the greenback.
A marked improvement could encourage risk-taking and aid commodity currencies like the Canadian and Australian dollars at the US dollar's expense, or, confusingly, it could also be seen as a sign of relative US economic strength and lift the dollar. The latest forecast is for a drop of 225,000 in payrolls with the jobless rate at 9.5 pct. But estimates range from a drop of 100,000 to as much as 365,000.
The dollar dipped 0.1 percent from late US trading on Thursday to 92.59 yen, and was capped by offers between 92.80 and 93.05, market players said. The greenback hit a seven-week low of 91.94 yen on trading platform EBS on Thursday. The dollar might rise to around 94 yen if the jobs data comes in strong, but any gains will probably be short-lived, said a trader for a Japanese brokerage. Against a basket of currencies the dollar was steady at 78.440, after bouncing from a 77.997 low on Thursday.
Analysts at RBC said it sat at a critical juncture, defined by two trendlines. One, an ascending support off the July 2008 low at 77.90; the other a descending resistance off the early March high at 78.70. These were converging fast toward 78.31, the 61.8 percent retracement of the rally from July 2008 to March 2009. The payrolls report could break the range.
The euro dropped 0.1 percent to 131.94 yen, up from a dip to 131.01 yen on Wednesday, its weakest since mid-July. One trader said offers were expected at 132.40 and above. It was steady at $1.4252, down from levels above $1.4300 on Thursday after European Central Bank President Claude Trichet sounded less hawkish than some expected. The ECB held interest rates at a record low 1.0 percent and warned that now was not the time to withdraw state support as economies emerge slowly from recession.