The dollar was within striking distance of a record low against the euro on Friday on worries about the health of the U.S. economy, and traders said it would stay pressured unless upcoming jobs data beat expectations. With the U.S. presidential vote out of the way, the market returned its focus to structural problems, particularly the U.S. current account deficit. "With all the focus on the current account deficit, sentiment is just overwhelmingly against the dollar right now," said Mitsuru Sahara, vice president of UFJ Bank's forex group. The dollar's broad-based weakness was most pronounced against the euro, given few signs that European policy-makers were overly concerned about the rise in their currency, traders said. As of 0630 GMT, the euro bought around $1.2880 , up slightly from late New York trade and near Thursday's high of 1.2898. It hit a record high of 1.2927 in mid-February. The dollar fetched around 106.05 yen , little changed from levels in late trade in New York, where it bounced back from a fresh seven-month low of 105.68 yen. Analysts said that in addition to perennial worries about the U.S. deficits, a view that U.S. economic growth was slowing also worked against the dollar. The market was awaiting U.S. employment data for October, due at 1330 GMT, for clues about the health of the economy.
A poll showed U.S. non-farm payrolls rose by 169,000, compared with a rise of 96,000 in September. Traders said a figure of above 200,000 could ignite a short-covering rally in the U.S. currency, since short-dollar positions had built up to unusually high levels. A reading above 200,000 would make it highly likely that the Federal Reserve would increase interest rates at its next policy-setting meeting on Nov. 10, and raise the likelihood that it would follow that up with an additional rise in December. The market would likely react more to a weaker reading and put the dollar under further selling pressure, said Hideaki Furumaya, forex manager at Trust & Custody Services Bank in Tokyo. A slide in oil prices only marginally supported the dollar. U.S. light crude was at $48.57 a barrel, well down from the all-time high of $55.67 hit at the end of last month. "More than such cyclical factors as oil prices and jobs data, the market right now is focused on a structural problem, namely the twin deficits, which is a very difficult issue to resolve," said Kikuko Takeda, forex manager at Bank of Tokyo-Mitsubishi. The dollar falling to a record low versus the euro is just a matter of time, she said.
NO INTERVENTION THREAT?
The dollar fell slightly on comments from a senior Japanese politician, who said that although the yen's recent rise had been rapid there was no need yet for Japan to intervene in the foreign exchange market to correct volatile movements. Kaoru Yosano, policy chief of the ruling Liberal Democratic Party, also told he did not expect Washington to aggressively pursue a weaker dollar as that would prompt capital outflows from the United States to Europe. Takeda of Tokyo-Mitsubishi said intervention was not a real threat at present as traders believe the Japanese authorities are aware of the difficulty in defending the yen amid the dollar's broad-based weakness. The Fed has raised rates three times since June, bringing its overnight funds rate to 1.75 percent. Despite those increases, the dollar index <=USD>, which shows the dollar's movement against a basket of currencies, has fallen five percent since the end of May, mainly on worries about the ability of the United States to fund its huge trade deficit.////