The dollar extended recent gains to four-month highs on the yen and held fairly steady versus the euro on Friday on expectations the United States would report jobs data later that could hasten U.S. interest rate hikes. Bets the U.S. saw its fastest jobs growth in more than three years last month boosted the dollar this week to 2004 peaks versus the yen and the euro and dealers say market optimism may have outpaced the 125,000 new jobs forecast for the 1330 GMT report. The greenback received help climbing above 111.40 yen , its highest since November 3, from speculation Japan has continued intervening to weaken the yen after stopping its rise at 3-1/2 year highs versus the greenback set last month. "The focus is very much on the payrolls today. What the market needs to see now is a significant upside surprise to sustain this dollar strength," said Steven Saywell, senior currency strategist at Citibank. "If we get a number that is completely consensus that would be disappointing now for the market and may see some dollar strength unwinding. What that would effectively signal is the jobs market is still improving only gradually and the Fed needs to be in no rush to hike rates."
By 1030 GMT the dollar traded little changed on the day at $1.2200 per euro . After the dollar rallied nearly five cents earlier this week to peak at $1.2056, slight support for the euro emerged on Thursday from the European Central Bank, which held rates steady at two percent and gave no sign an interest rate cut was near. The dollar retreated slightly in the European morning to 111.07 yen, steady versus its previous New York close, but possible Bank of Japan yen-selling intervention remained a key focus. "No one is ready to put on short dollar/yen positions," said Niels Christensen, currency strategist at Societe Generale in Paris.
WEAK SPOT
The labour market has been the weak spot in the U.S. economic recovery and the market is looking for signs of stronger growth in payrolls to prompt the U.S. Federal Reserve to raise interest rates and make dollar returns more attractive. "The jobs data will be crucial for the dollar," said Kenji Kobayashi, senior manager of the foreign exchange and treasury division at Bank of Tokyo-Mitsubishi in Tokyo. He said the dollar would likely continue moving upward if non-farm payrolls came in above 200,000 but if the figure turns out lower than 100,000, the U.S. currency could come under "very strong" selling pressure. Also in focus is a news conference with ECB President Jean-Claude Trichet and Bank of France Governor Christian Noyer at 1430 GMT and an appearance by U.S. Treasury Secretary John Snow at 1630 GMT. On Thursday, Trichet said rates were appropriate and the economic risks balanced -- ECB code for unchanged monetary policy in the months ahead. This disappointed those in the markets who thought the recent high levels of the euro -- which hit a record peak of $1.2927 in February -- might lead the ECB to ease rates to help euro zone exporters. Meanwhile, dealers suspected the Bank of Japan intervened intermittently in dollar/yen from around 110.50 on Thursday, raising speculating Japan is determined to prevent the dollar's recovery from faltering.///