* Dollar steadies after drop, index down about 0.8 pct for
* Dollar at 116.10 yen, euro close to $1.06, third week of
* Sterling fades after 2 up days, peso holds intervention
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Jan 6 The dollar clawed back ground on
Friday but was heading for a second straight weekly loss, having
tumbled the previous day on a rare piece of poor U.S. data and
apparent action by Chinese authorities to shore up the yuan.
Most currencies were range trading ahead of U.S. non-farm
payrolls due later in the session, but the dollar was 0.7
percent higher against the yen at 116.10 and nudged the
euro down to $1.0590 by 0915 GMT.
Sterling was treading water ahead of a decision
expected over the next week on the role of parliament in
soon-to-start Brexit negotiations, while Mexico's peso
steadied having surged after currency intervention on Thursday.
"It's a bit quieter following the moves yesterday and going
into the payrolls it will take a fairly strong print especially
on the earnings side to reinvigorate the stalled dollar rally,"
said Credit Agricole head of G10 FX strategy Valentin Marinov.
"My hunch is that investors are just waiting for the Trump
The dollar index, which measures the greenback against six
of the world's top currencies, was at 101.62 having set a
14-year high of 103.820 three days ago on a seeming resumption
of the dollar-bullish 'Trump trade'.
But it crumpled on Thursday following lacklustre U.S.
employment data, having already been buffeted by a surge in the
Chinese yuan as Beijing made moves to shake out large bets
against the currency.
There was more action overnight as borrowing rates for the
offshore yuan or CNH leaped to 61 percent, their highest
in a year, and the CNH headed for its biggest weekly gains since
it was introduced in 2010 as China's latest attempts to squeeze
speculators bore fruit.
All eyes on Friday were on non-farm payrolls, expected to
have increased by 178,000 jobs last month after a similar rise
in November, according to a Reuters survey of economists.
The U.S. unemployment rate, though, is forecast to tick up
to 4.7 percent from a nine-year low of 4.6 percent in November.
"The global economy looks to be in better shape compared to
a year ago so the (current) risk-off trend could be limited,"
said Shin Kadota, chief Japan FX strategist at Barclays in
"But China-related headlines appear to have given
participants a chance to adjust positions which had excessively
favoured the dollar."
The Australian dollar nudged down 0.2 percent to $0.7327
after gaining 0.7 percent overnight, when it touched a
three-week high of $0.7356. It received some support as data
showed Australia posted its first trade surplus in almost three
years in November.
The New Zealand dollar followed, inching down 0.1 percent to
$0.7017 after climbing to a three-week peak of $0.7040.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Marc Jones; editing by John Stonestreet)