Euro holds gains post EU action, U.S. jobs in focus

A money counter counts 500 euro banknotes in a Bank in Bern August 15, 2011.

SYDNEY (Reuters) - The euro held gains in Asia on Friday, having rallied for a third session overnight when the European Central Bank (ECB) took steps to contain the euro zone crisis, with markets now focused on key U.S. jobs data.

The euro rose two cents to $1.3427, from a low of $1.3240 on Thursday. It jumped to a one-week high of $1.3450, after the ECB announced new 12- and 13-month lending operations for banks which will tide many through all of 2012.

While some investors were disappointed the ECB didn't cut interest rates, commodities, equities and risk currencies rallied. Copper had its biggest one-day gain in 20 months and the CRB index closed up 2 percent higher. The Australian dollar gained nearly 1 percent, last trading at $0.9730, having hit a one-year trough of $0.9388 earlier in the week.

Investors are now focusing on Friday's U.S. non-farm payrolls report for September, which is expected to show 60,000 new jobs created and the unemployment rate unchanged at 9.1 percent.

Greg Gibbs, strategist at RBS in Sydney, said markets have probably seen the best of the risk rally as they start to think about what's coming next.

"There are still plenty of problems that face the European financial system... The risk rally will probably run out to steam in the next week."

Gibbs expects the euro to retreat to its recent lows. The single currency, which has lost struck a 10-month trough of $1.3144 earlier this week, is up 0.5 percent so far this week.

For now, the euro looked set to retest $1.3448, the 38.2 Fibo of the $1.3937/$1.3145 move and a break above that would target the 21-day MA at $1.3575.

The ECB said it will also buy 40 billion euros of covered bonds to help offset a coming rush of maturities, while the Bank of England will purchase 75 billion of bonds over four months.

Sterling dived to its lowest level in 14 months against the dollar at $1.5270 in the wake of the quantitative announcement, before bouncing back to $1.5431. It fell 0.82 percent against the euro and more than 1 percent on the Australian dollar.

The dollar index .DXY eased 0.4 percent to 78.616, off a nine-month peak of 79.838 earlier in the week. The dollar remained stuck at 76.68 against the yen, off a three-week peak of 77.26 struck on Monday.

(Editing by Wayne Cole)