The dollar held steady against the yen and the euro on Thursday, maintaining overnight gains, and could strengthen more after strong private employment data lifted expectations for Friday's US payrolls number.
The greenback took a breather against the yen after rallying 1.5 percent on Wednesday for its biggest one-day rise in more than three months, as dollar selling by Japanese exporters tempered the rally.
The euro eased slightly to $1.3141, hovering near trendline support at $1.3110, with another possible downside target lurking at $1.3081, the euro's 200-day moving average.
The US ADP report showed a record 297,000 private-sector jobs were created in December, reinforcing views that the country is on a steady path to recovery and sending US Treasury yields higher across the curve, which gave a lift to the dollar.
Adding evidence of economic recovery, a separate report showed the US services sector expanded in December. The US non-farm payrolls data due on Friday is expected to show overall gains of 175,000 jobs for December. The forecast was revised higher from 140,000 in the wake of the ADP data.
The US policy mix of quantitative monetary easing, together with an $858 billion package including renewed tax cuts that was adopted in December, is supporting the US economy and is positive for the dollar, Tomita said. A trader for a Japanese brokerage house said that if Friday's jobs data shows an increase of around 300,000 jobs, that could open the way for an eventual dollar rise to 86 to 87 yen.
The dollar index, which measures the greenback's value against a basket of major currencies, stood firm at 80.274, a sharp turnaround from last week's 78.775 trough.
The dollar stood at 83.20 yen, holding steady compared with late US trade on Wednesday after pulling up from an eight-week low of 80.93 yen hit on trading platform EBS earlier this week. Traders cited dollar-selling by Japanese exporters at levels above 83.20 yen, while short-term players were said to be picking up the greenback on dips.
The euro, which has traded mostly between $1.30 and $1.34 since December, stayed under pressure on nagging worries about debt problems in certain eurozone nations.
"There are still negative factors around for the euro but they are probably not fresh ones that would change the currency's trend. The market is still watching how the eurozone's debt problems will pan out," said Ayako Sera, market strategist at Sumitomo Trust and Banking. The Australian dollar traded below parity and fell 0.2 percent to $0.9974. In addition to the latest batch of upbeat US economic data, worries about widespread floods in the Australian state of Queensland, which produces two-fifths of the world's cooking coal, Australia's top export, provided another excuse to take profits on the Aussie.