By Naomi Tajitsu
TOKYO, Feb 1 (Reuters) - The dollar hovered in range of a
record low against the euro on Friday before crucial U.S.
economic data due later in the day that will offer hints on how
close the U.S economy is to a recession.
Traders are looking to U.S. non-farm payrolls and a reading
of factory activity to help them determine whether to keep
dumping the dollar, which tumbled to its weakest in nearly three
years against the yen last month.
Currencies were little changed as investors were reluctant to
place bets either way. A slide in Japanese stocks amid gains in
other Asian equities markets did little to offer a clear gauge of
risk appetite in financial markets.
The U.S. currency has been stung by two hefty interest rate
cuts by the Federal Reserve in less than 10 days, along with
ongoing concerns about credit problems and signs of serious
economic weakness.
"Basically, the payrolls figures must be very strong to spur
any significant dollar buying," said Hideaki Inoue, a forex
manager at Mitsubishi UFJ Trust and Banking.
Expectations are for a gain of 80,000 non-farm payroll jobs
in January, compared with a paltry 18,000 in December, which had
fuelled expectations that the economy was on the brink of
recession. []
The dollar <JPY=> hovered around 106.40 yen, little changed
from late New York trade, but off the previous day's low of
105.71 yen hit on electronic trading platform EBS.
Traders said a weak jobs reading may push the dollar back
into the 105 yen region and closer to 104.95 yen touched last
month for the first time since May 2005, as it would ratchet up
speculation that a recession is looming.
At the same time, some market participants said a strong
figure would show that employment is holding up despite a
struggling housing sector and sputtering consumer sector, and may
push the U.S. currency up towards 108 yen.
The euro <EUR=> was little changed and hovered near $1.4865,
in range of a record high of $1.4968 hit on EBS in November.
The euro was steady against the yen at 158.16 yen <EURJPY=R>.
The Nikkei share average <> slipped 0.4 percent, while
most other Asian stock indexes edged higher.
Many investors look at stock moves to assess the market
appetite for risky positions, which include trades to sell the
low-yielding yen for assets in higher-yielding currencies. A
climb in stocks often spurs risk taking, while a slide tends to
cool such demand.
CREDIT PROBLEMS
Overall, stock market movements have calmed following a
frantic sell-off last month spurred by fears of a U.S. recession,
which prompted an emergency, 75-basis-point rate cut by the Fed
last week.
The U.S. central bank followed up that move by slashing rates
by half a percentage point to 3.0 percent earlier this week,
leaving the fed funds rate the lowest among developed countries
save Japan and Switzerland.
Market participants were also waiting to see whether more
U.S. bond insurers suffer a chop in credit ratings as many have
been stung by ongoing credit problems.
Signs that bond insurers have become the latest casualty of
crumbling credit markets has ratcheted up pressure to sell the
dollar in recent weeks.
MBIA Inc <MBI.N>, the world's biggest bond insurer, on
Thursday said it suffered $3.5 billion in write-downs linked to
U.S. subprime mortgages, while posting a record quarterly loss.
At the same time, it assured investors that it was working
towards bolstering its capital and retaining its current credit
rating.
(Additional reporting by Masayuki Kitano)
