Dollar eases vs majors, spotlight on payrolls

The dollar ticked lower versus other major currencies on Friday in technically-led trade ahead of a key U.S. jobs report.

Signals for non-farm payrolls have been mixed, with a surprise gain in private sector jobs in March offset by news that first-time applications for U.S. jobless benefits rose last week to a 2-1/2 year high.

But overall, investor sentiment has improved in recent sessions, and markets are now only expecting a 25 basis point rate cut from the Federal Reserve this month.

Economists forecast the U.S. economy likely cut 60,000 jobs in March for its third straight month of losses, with the unemployment rate seen rising to 5.0 percent, from 4.8 percent in February. The data is due at 1230 GMT.

"It's pre non-farm payrolls trading. Even if the figure comes in around zero, from a fundamental point of view that's still negative for the dollar because that will not stop the uptrend in the unemployment rate," said Antje Praefcke, currency strategist at Commerzbank Corporates & Markets in Frankfurt.

By 0749 GMT, the euro was up 0.2 pct on the day at $1.5718, but well off March's record peak above $1.59.

Hourly technical charts showed the euro breaking through a 200-hour moving average located at $1.57. The dollar was steady at 102.32 yen. It was down at 1.0073 Swiss francs.

SHRUGGING OFF WEAK ECONOMY?

The Fed has chopped rates since September by a total of 3 percentage points to 2.25 percent, to deal with the credit crisis and shield the economy from an ailing housing sector.

Late on Thursday, San Francisco Fed President Janet Yellen echoed comments on the economy made by Fed Chairman Ben Bernanke earlier this week, saying the U.S. economy has "all but stalled and could contract" in the first half of 2008.

But the dollar took the comments in its stride.

"We think it's possible for the U.S. dollar to strengthen despite a weak economy, providing that euro zone data continues to deteriorate and that the Federal Reserve does not take action that would suggest a monetising of mortgage-backed securities woes," UBS (nyse: UBS - news - people ) said in a research note.

"We continue to target euro/dollar at $1.55 over one month and $1.47 over three months."

Elsewhere, the Australian dollar fell 0.2 percent to US$0.9140 after February retail sales unexpectedly dipped 0.1 percent from the previous month.

Reserve Bank of Australia Governor Glenn Stevens said on Friday that growth in domestic demand was moderating despite uncomfortably high inflation, suggesting that interest rates had risen enough for now.