* U.S. nonfarm payrolls seen showing jobs loss of 65,000
* Analysts say sluggish figure may trigger more dlr selling
* Weak reading may spur speculation of more Fed stimulus
(Adds details, updates prices)
By Naomi Tajitsu
LONDON, Aug 6 (Reuters) - The dollar struggled near a 3
1/2-month low versus a currency basket on Friday as investors
braced for U.S. data expected to show a fall in jobs for a
second month, underlining the fragility of the labour market.
Currencies were generally little changed as traders steered
clear of big positions before the much-anticipated data, leaving
the dollar stranded near a three-month low against the euro and
an eight-month trough versus the yen hit earlier this week.
An unexpected rise in weekly U.S. jobless claims on Thursday
fuelled concerns about the labour market, and analysts said
dollar risks were skewed to the downside as Friday's data was
expected to show the economic recovery was losing steam.
"We expect a number slightly better than consensus, but it's
questionable whether this will help the dollar as interest rates
are so low and we have a divergence of softer U.S. economic data
and stronger European data," said Marcus Hettinger, global
currency strategist at Credit Suisse in Zurich.
Forecasts are for a loss of 65,000 jobs in July. Data on
Thursday showed jobless claims rose by 19,000 last week,
although these figures will have no bearing on Friday's data.
Hettinger said dollar weakness would continue in the run-up
to the Federal Reserve's policy meeting next week, as a spate of
weak economic data has raised speculation the central bank would
ease monetary policy further by providing more funds.
Some analysts said they would be watching the private
payrolls growth component as leading data has been consistent
with a moderate rise.
If that growth averages around 100,000, where it has been at
in the first half, analysts at Bank of Tokyo-Mitsubishi UFJ said
the Fed is unlikely to alter its growth outlook and, ultimately,
its monetary policy stance to keep rates low for now.
"In those circumstances, today's NFP report could prove
supportive for the dollar as it should help pare near-term Fed
monetary easing expectations," they said in a note.
By 1101 GMT, the euro <EUR=> fell 0.2 percent to $1.3163
after a surprise drop in German industrial output
[] but trade was subdued. The euro was parked below
$1.3200 options set to expire later in the day. It had risen to
$1.3262 earlier this week, its highest since early May.
Technical analysts cited near-term resistance at
$1.3265/1.3280, lows hit in March and April, while support was
seen around $1.3125, the 38.2 percent Fibonacci retracement of
the euro's fall from November 2009-June 2010.
Market players were watching whether the pair could close
above that level at the end of the week, which would signal
continued bullishness.
UPWARD PRESSURE ON YEN?
The dollar index <.DXY> was little changed at 80.938, not
far from 80.469 hit on Monday, its lowest since April. While it
held near its 200-day moving average at 80.792 on Friday, a
weekly close below that may spell more losses, analysts say.
Against the yen, the dollar <JPY=> rose 0.2 percent to 86.00
yen, treading above 85.32 yen hit on Wednesday and where
technical analysts saw some support. A fall under that level
would mark the dollar's weakest since November 2009.
Traders said a sizable volume of knockout option positions
below 85 yen suggested that the dollar's fall could become more
volatile if it does step into those price levels.
A breach of 85.00 yen is seen cranking up rhetoric by
Japanese authorities that a strong yen would harm the economy,
but many market players think Tokyo is unlikely to pull the
trigger unless the moves are extremely rapid. []
The Canadian dollar fell <CAD=D4> after data showed Canada's
economy shed 9,300 jobs in July, compared to forecasts for a
15,000 gain. []
(Additional reporting by Tamawa Desai; Editing by Ron Askew)
