Pound bounces off low after U.S. jobs report

LONDON (Reuters) - Sterling rose across the board on Friday, boosted by broad losses in the dollar after a jump in the U.S. unemployment rate fuelled nagging worries on the state of the world's biggest economy.

The UK currency pulled back from a 2 1/2-year low against the dollar hit earlier in the day, but sentiment remained downbeat on a view that the domestic economy is deteriorating fast and raising the chances of monetary easing this year.

The dollar was slammed on Friday after the U.S. unemployment rate unexpectedly shot up to a near five-year high of 6.1 percent in August, prompting traders to adjust short sterling positions after the currency's 2.5 percent fall this week.

"Sterling's jump was down to the jobs figures, and it was down to an adjustment of the extreme move we've seen this week," said Simon Derrick, head of currency research at Bank of New York Mellon.

On a trade-weighted basis, the pound fell to 87.9, its lowest since October 1996, before pulling back to 88.4 later in the session.

Sterling fell as low as $1.7538 before recovering to $1.7660 by 3:44 p.m., up 0.4 percent on the day. The pound jumped as high as $1.7744, boosted after the U.S. jobs data.

It edged higher against the euro, which fell 0.3 percent to 80.70 pence, but the single European currency stayed near a record high of 81.86 pence hit on Thursday.

The Bank of England left interest rates unchanged at 5 percent on Thursday, but a rapidly deteriorating economic outlook has lent support to arguments for a rate cut, even though inflation pressures persist.

Such a move would decrease sterling's yield advantage over assets denominated in other currencies, and this prospect has kept the UK currency under extreme selling pressure, after it plunged nearly 9 percent last month.

(Reporting by Naomi Tajitsu, editing by Ron Askew)