Euro perks up as ECB signals no imminent action; USD eyes jobs

SYDNEY Thu Dec 5, 2013 11:24pm GMT

1 of 2. A U.S. dollar note (bottom) is pictured alongside other currencies including (L-R) the Australian Dollar, Singapore Dollar, Korean Won and China's Yuan in this picture illustration taken in Washington, October 14, 2010.

Credit: Reuters/Jason Reed

SYDNEY (Reuters) - The euro traded at five-week highs against the dollar early in Asia on Friday, having powered higher overnight after the European Central Bank gave no fresh indication that it would ease policy anytime soon.

While ECB President Mario Draghi said the bank was ready to take fresh policy action to support a fragile recovery, he was light on details including whether the bank would use a negative deposit rate.

Draghi also noted that liquidity in the banking system had improved since the last cash injection, or LTRO, and attached conditions for any repeat. These comments saw German bond yields jump to seven-week highs, which in turn helped underpin the euro.

"The comments do not indicate any sense of urgency on the part of the ECB," London-based Martin McMahon, economist at Commonwealth Bank wrote in a note to clients.

"If there is to be a new LTRO, the ECB wants 'to make sure that it reaches the economy'. Again the comments do not indicate that follow-up LTROs are imminent."

The common currency last stood at $1.3672, having climbed more than 0.5 percent on Thursday to $1.3677, a level not seen since October 31. Against the yen, it edged up to 139.14, but struggled to break above a five-year peak of 140.03 set earlier in the week.

The euro also hit one-week highs against sterling, which showed little reaction to the Bank of England's decision to keep interest rates unchanged.

The common currency was fetching 83.68 pence, having risen as high as 83.79 earlier.

The rebound in the euro knocked the dollar index .DXY to a five-week low of 80.231. Further downside in the greenback hinges on how U.S. jobs data due later on Friday turns out.

Analysts polled by Reuters expect the U.S. economy to have created 180,000 jobs in November, following 183,900 in the previous month.

Any upside surprise will no doubt keep alive expectations the Federal Reserve may start to scale back its bond-buying stimulus program at the December 17-18 meeting. Such an outcome could bolster the U.S. dollar.

Conversely, a soft report will see the market expect the Fed to maintain its stimulus program for longer, a possible negative for the greenback but positive for riskier assets.

"A dismal development may encourage the FOMC to carry the highly accommodative policy stance into 2014 in order to encourage a stronger recovery," said David Song, currency analyst at DailyFX.

(Editing by Shri Navaratnam)