* Dollar rebounds vs euro after a sharp fall
* Aussie hit by slump in home-building approvals
* Asian shares slide after drop on Wall Street
By Satomi Noguchi
TOKYO, Jan 8 (Reuters) - The dollar rose against the euro on
Thursday, recovering some ground made after steep U.S. job losses
in the private sector, as some traders thought the greenback's
slide the previous day was too sharp.
The dollar's rebound was helped by its gains versus the
Australian dollar after a shocking slump in home building
approvals reinforced the case for further cuts in interest rates
to help the country avoid recession. []
The dollar rose 0.2 percent against the euro from late New
York trade to $1.3615 <EUR=>, after having risen as high as
$1.3747 on Wednesday on trading platform EBS.
But gains in the U.S. currency were limited as Asian shares
tumbled, mirroring U.S. stock declines on renewed economic
concerns after the grim labour market data.
Tokyo's Nikkei share average <> fell 3.9 percent and the
MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS>
shed 4.0 percent.
The dollar had dropped from one-month highs against the euro
and the yen on Wednesday following a dismal report from ADP
Employer Services that showed private employers shedding a
staggering 693,000 jobs in December. []
The data and comments from a Federal Reserve official cast
more doubt on the outlook for U.S. non-farm payrolls data due on
Friday and highlighted the challenges facing President-elect
Barack Obama as he plans a large economic stimulus package.
A sharp fall on Wall Street also underscored fears of a
prolonged U.S. recession and hurt sentiment for the dollar.
But traders said the previous day's fall in the dollar had
been exaggerated in a market with few active participants such as
hedge funds, which typically provide liquidity to currency
trading.
"The euro's jump against the dollar yesterday came across as
too much, too fast, even though the job loss number from the U.S.
private sector was an eye-popping one," said a trader at a
Japanese bank.
Earlier this week, the euro touched a one-month low of
$1.3312 as people favoured the dollar on hopes for the economic
stimulus package from the Obama administration.
Against the yen, the dollar slipped 0.4 percent to 92.25 yen
<JPY=> after the Nikkei extended losses. The dollar had hit a
one-month high of 94.65 yen on Tuesday on EBS.
The single currency fell 0.4 percent to 125.90 yen
<EURJPY=R>.
The U.S. economy is likely to contract until the middle of
2009, Kansas City Fed President Thomas Hoenig said on Wednesday.
[]
"While there are hopes for the Obama administration, the U.S.
economy is weak and its fiscal deficit is expanding. The dollar
will probably find it difficult to keep gaining," said Yousuke
Hosokawa, treasury department senior manager at Chuo Mitsui Trust
and Banking Company.
Traders said the U.S. employment report on Friday will help
set the direction for the market after the recent reversal in
dollar-short positions built late last year.
U.S. non-farm payrolls are expected to have fallen 500,000 in
December, according to a Reuters poll.
Traders now await interest rate decisions from the Bank of
England expected at 1200 GMT. The central bank is seen cutting
interest rates by at least another 50 basis points to 1.5 percent
-- taking them to a level not seen since the BoE was created in
1694 -- just a month after it slashed them 100 basis points.
[]
The Aussie dropped 1.2 percent to $0.7045 <AUD=D4>, falling
from a three-month high around $0.7270 hit the previous day.
The Aussie slipped 1.6 percent to 65.06 yen <AUDJPY=R>, off a
two-month high above 68 yen touched earlier this week, as
investors grew wary about higher-yielding currencies and riskier
assets as Asian shares tracked U.S. stocks lower on renewed fears
about a sharp global slowdown.
(Additional reporting by Kaori Kaneko; Editing by Hugh Lawson)
