* Dollar rises vs euro on short covering
* Market awaiting U.S. jobs data due later in the day
* Traders watching rescue plan for U.S. automakers
By Kaori Kaneko
TOKYO, Dec 5 (Reuters) - The dollar rose against the euro on
Friday as investors covered their short positions, but its gains
were limited before a U.S. employment report that is expected to
show the worst job losses in more than two decades.
The dollar had fallen on Thursday amid expectations that the
European Central Bank's aggressive rate cut would help shore up
the euro zone economy and stave off a deep recession.
Dismal U.S. jobs data is likely to encourage the Federal
Reserve to cut rates to just 0.5 percent this month.
The U.S. economy is forecast to have lost 340,000 jobs in
November, which would be the worst monthly job loss since 1982,
according to economists polled by Reuters. []
"A deterioration in the labour market will affect private
consumption, which would dampen economic sentiment," said Satoru
Ogasawara, macro strategist at Credit Suisse.
"The dollar is likely to appreciate against higher-yielding
currencies on investors' increasing risk-aversion but is expected
to be weighed down against the yen," he said.
The euro was nearly flat at $1.2780 <EUR=>. It earlier fell
as low as $1.2732 from late New York trade on Thursday, partly
due to some investors liquidating investments to secure dollars
before the year-end, traders said.
The European single currency was little changed at 117.95 yen
<EURJPY=R>, compared with a five-week low of 116.35 yen struck on
trading platform EBS the previous day.
The dollar climbed 0.1 percent to 92.32 yen <JPY=>, after
hitting its lowest point in five weeks at 92.05 yen on EBS in
U.S. trading.
The market is also cautious due to uncertainty over the fate
of troubled U.S. automakers and their attempts to secure
government aid.
The chief executives of General Motors Corp <GM.N> and
Chrysler LLC said they would consider restarting merger talks if
needed to win their slice of up to $34 billion in emergency U.S.
government aid. []
The CEOs will appear again before the U.S. House Financial
Services Committee on Friday.
"The dollar's gains will likely be limited before the U.S.
jobs data and the U.S. automakers' testimony. But investors are
likely to grow increasingly risk-averse and the dollar may move
closer to 90 yen next week," said Kwang-ja Kim, deputy general
manager at Shinsei Bank.
The ECB made its biggest-ever cut in interest rates on
Thursday, lowering benchmark credit costs by 75 basis points to
2.50 percent as it forecast a grim year for the recession-bound
euro zone economy. []
The Bank of England also slashed rates to their lowest level
since 1951 and indicated more needed to be done to prevent a
credit squeeze tipping Britain's economy into a prolonged
recession. []
The yen and dollar were likely to hold their strength against
European currencies as rate cuts erode the advantage of
higher-yielding currencies, said Yousuke Hosokawa, treasury
department senior manager at Chuo Mitsui Trust and Banking.
(Additional reporting by Satomi Noguchi; Editing by Chris
Gallagher)
