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FOREX-Dollar bulls and bears await payrolls, ECB leaves euro underwhelmed

Published 03/06/2016, 03:33 pm
Updated 03/06/2016, 03:40 pm
© Reuters.  FOREX-Dollar bulls and bears await payrolls, ECB leaves euro underwhelmed
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* Euro nurses drop to 3-year low vs yen, dollar awaits jobs report

* ECB leaves policy mix nearly unchanged

* OPEC fails to agree a clear oil-output strategy

By Lisa Twaronite and Ian Chua

SYDNEY, June 3 (Reuters) - The euro wallowed near a three-year low against the yen on Friday, after investors were underwhelmed by the European Central Bank's decision to refrain from making any material changes to its policy mix.

The dollar also dropped to a two-week low against its Japanese counterpart, though investors' caution ahead of the U.S. jobs report later in the session limited its losses.

The market consensus is for the U.S. economy to have created 164,000 jobs in May, little changed from April. ECONUS

"There's an uneasy feeling whenever markets make big moves lately, but there is no particular reason to take significant long positions in dollar or yen until we see the jobs data," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

The dollar slipped 0.3 percent to 108.57 yen JPY= , after earlier dropping as low as 108.50 yen, poised to log a 1.6 percent loss for the week which saw it rise as high as 111.455 yen on Monday.

That was its highest since late April, and made it ripe for profit-taking, market participants said.

The euro's decline kept the dollar index near a two-month peak, leaving it poised for a breakthrough should the non-farm payrolls due later in the day bolster expectations for an imminent hike in U.S. rates.

The index .DXY , which tracks the greenback against a basket of six major rivals, was down 0.1 percent at 95.499, on track for a flat weekly performance.

As recently as early May, most investors did not believe that the U.S. Federal Reserve would raise interest rates as early as June. But comments from Fed officials, including Fed Chair Janet Yellen herself, put the possibility back on the market's radar.

The euro stood at 121.15 yen EURJPY=R , down 0.2 percent after dipping as low as 121.065 on Thursday - a level not seen since April 2013, and down 1.1 percent for the week.

Against the dollar, the euro was steady at $1.1156 EUR= . It remained above a 2 1/2-month low of $1.1097 logged on Monday, and up slightly for the week, though shy of its overnight high of $1.1221.

"The euro came under downside pressure largely because participants were expecting the ECB to make a greater upward revision to their long-term inflation forecast, particularly following the rebound in crude oil prices," said Elias Haddad, FX strategist at Commonwealth Bank.

"The lack of a lift in the ECB's inflation forecasts leaves the door open to more aggressive easing measure by the ECB which will weigh on the euro."

The ECB nudged up its 2016 inflation forecast to a mere 0.2 percent, from 0.1 percent, still far below its target of nearly 2.0 percent.

The bank kept rates unchanged, deep in negative territory, and President Mario Draghi warned the risks to the euro area growth outlook remain tilted to the downside. closely watched event that failed to generate much excitement was a meeting of oil producing nations, which again was unable to agree on a clear oil-output strategy as Iran insisted on steeply raising its own production. that track oil prices were left floundering. The Canadian dollar last traded at C$1.3093 per USD CAD=D4 , having touched a one-week low of C$1.3144 on Thursday.

(Editing by Eric Meijer and Kim Coghill)

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