FOREX-Dollar steady vs yen as focus turns to U.S. jobs data

Fri May 3, 2013 6:33am BST

* Focus on US jobs data; 145,000 job growth expected

* Euro steadies after Thursday's drop

* ECB Draghi's comments on deposit rates dents euro

By Masayuki Kitano

SINGAPORE, May 3 (Reuters) - The dollar held steady versus the yen on Friday, with the focus on whether U.S. jobs data later in the day will add to concerns about the economic outlook and bolster bets for the Federal Reserve to stick with its bond-buying programme.

Economists polled by Reuters are looking for job growth of 145,000 last month, up from 88,000 for March. The unemployment rate is seen holding steady at 7.6 percent.

Given a weak reading on private sector hiring released earlier this week, market players probably suspect that the jobs data might be weaker, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

"I don't think there will be that much of an impact even if it were to come in at around 100,000 or so," Okagawa said, referring to nonfarm payrolls.

If the jobs data adds to recent signs of a softening in the U.S. economy, it could intensify speculation that the Fed is unlikely to scale back its bond purchases very soon, and that its next move might even be to increase its debt buying, now at $85 billion per month. Such talk would likely weigh on the dollar.

In a policy statement on Wednesday after its latest policy meeting, the Fed had indicated that it may increase or decrease its monthly bond purchases depending on the outlook for the labour market and inflation.

The dollar held steady at 97.99 yen, having pulled up from a two-week low of 96.99 yen set on April 30. Moves in the dollar versus the yen were subdued, with Japanese markets closed on Friday for a public holiday.

In an encouraging sign for the U.S. labour market's outlook, data released on Thursday showed that the number of Americans filing new jobless benefits claims fell sharply last week to a five-year low.

The report on jobless claims had helped give a lift to the dollar against the yen on Thursday, although it has no direct bearing on Friday's April jobs data.

EURO

The euro steadied somewhat versus the dollar, but was seen facing headwinds after sliding the previous day when the European Central Bank cut interest rates and held out the possibility of further policy action.

The euro edged up 0.1 percent to $1.3071, but remained well below a two-month high of $1.3243 set on Wednesday on trading platform EBS.

The ECB cut its benchmark refinancing rate by 25 basis points to a record low 0.5 percent on Thursday in a widely expected move.

The single currency came under pressure after ECB President Mario Draghi said the bank is technically ready for negative deposit rates and noted downside risks to the economy.

A negative deposit rate would effectively penalise banks for hoarding cash. Such a move could drive money out of the euro zone into other higher-yielding assets and encourage the banks to lend out money rather than hold it at the central bank.

"One of the frustrations of the ECB is the monetary transmission mechanism has broken down. I think in order to aid the repair of that, there's a likelihood that we'll see further measures," said Mitul Kotecha, Hong Kong-based head of global foreign exchange strategy for Credit Agricole.

Such talk of further possible ECB action may weigh on the single currency, he said.

"I think that will help cap the euro at a time when the growth outlook in Europe continues to remain very weak."