TOKYO, Dec 8 - The dollar fell to three-year lows against the yen and was mired near record lows versus the euro on Monday as last week's weaker-than-expected U.S. jobs data added fuel to the currency's broad-based downtrend. The dollar, which had plumbed record lows against the euro for six consecutive trading days by Friday, came within a tick of the latest lows in the absence of strong enough factors to turn around the dominant trend. "The U.S. economy may not necessarily be in that bad a shape but the downward momentum in the dollar, initially blamed on geopolitical risks and the U.S. current account deficit, has been relentless," said Mitsuru Sahara, vice president of currency dealing at UFJ Bank. "The market has consistently rewarded those who sold the dollar and disappointed those who bought it. At some point, there could be a sharp reversal, but there are no obvious factors in sight at the moment that could turn things around," he said. As of 0243 GMT, the dollar was at 107.67/72 yen after touching a three-year low of 107.51 yen . The euro stood at $1.2159/64 , after rising to a session high of 1.2177 -- a hair's breadth away from the record high of 1.2178 hit on Friday. "Unless this current dollar-selling sentiment changes, the euro will continue hitting new record highs," said Junya Tanase, foreign exchange strategist at JP Morgan Chase. "I think $1.25 (per euro) could be possible in the mid- or long-term."
INTERVENTION JITTERS
Despite the overwhelming bearishness in the market, the greenback's decline against the yen was somewhat hesitant amid widespread caution against possible yen-selling intervention by the Japanese authorities. Japan's top financial diplomat, Zembei Mizoguchi, kept up the jawboning, saying he did not expect the dollar's weakness to continue, given the strength of the U.S. economy. Some traders said the dollar bears could keep a low profile during Asian market hours, paying some respect to the risk of intervention, but that they could resume pummeling the dollar lower in European or U.S. trading hours. "At these levels, everyone is cautious about intervention," said a dealer at a Japanese bank. "But unless it's a very aggressive intervention, I wouldn't expect the dollar to bounce much above 108 yen. At the moment it's a wait-and-see game." The market was also awaiting the U.S. Federal Reserve's rate-setting Federal Open Market Committee (FOMC) meeting on Tuesday. While no monetary policy action was expected for now, the focus was on a statement due to be released after the meeting. Traders said that if the Fed dropped the phrase about interest rates staying low for a "considerable period", that could signal an earlier-than-expected credit tightening next year and would also be a confirmation that the Fed was becoming more confident about the U.S. economic recovery. "If (that phrase was) omitted, long-term interest rates would rise and that would support the dollar, but only temporarily," said JP Morgan's Tanase.//