* Dollar falls as market braces for weak U.S. payrolls data
* Yen rises as falling stocks dampens risk appetite
* Sterling bounces as BoE delivers 50 bps rate cut
(Adds quotes, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Jan 8 (Reuters) - The dollar fell against a
basket of currencies on Thursday ahead of a government report
expected to show the U.S. economy lost more than half a million
jobs in December for the second month in a row.
The Japanese yen traded broadly higher as falling global
stocks and weak sales at top U.S. retailer Wal-Mart tempered
the market's appetite for risk and heightened fears about the
global economic outlook.
Worries about the U.S. labor market took center stage after
an ADP survey earlier this week pointed to steep job losses in
the private sector. Weekly jobless claims data showing the
number of Americans on the unemployment rolls rising to a
26-year high further dampened demand for the greenback.
"There's definitely the worry about the jobs data
tomorrow," said Sacha Tihanyi, currency strategist at Scotia
Capital in Toronto. "Expectations are geared for a fairly ugly
number despite the fact that the weekly initial claims data was
not as bad as it could have been."
In late trading in New York, the ICE Futures U.S. dollar
index <.DXY>, which tracks the value of the greenback against a
basket of six currencies, fell 0.7 percent to 81.495.
The dollar was down 1.6 percent at 91.16 yen <JPY=>,
extending losses after Wal-Mart Stores Inc <WMT.N> -- the
world's largest retailer -- posted weaker-than-expected
December sales and cut its profit forecast. For full story, see
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"The Wal-Mart news is negative for the overall economy and
certainly a negative for stocks, and this has short-circuited
the dollar's New Year rally," said Brian Dolan, chief currency
strategist, at Forex.com in Bedminster, New Jersey.
The dollar had rallied in the first few days of 2009,
buoyed by a planned U.S. stimulus package that many hope would
help pull the economy out of recession. But that optimism
proved short-lived as fresh U.S. data and dismal earnings
figures reignited fears of a prolonged slowdown.
Following Wednesday's grim ADP report, which showed
private-sector job cuts of 693,000, economists have revised
downward their forecasts for U.S. nonfarm payrolls in December
to show job losses of 550,000, from an original estimate of
500,000, according to a Reuters poll.
"The dollar is looking vulnerable with all the bad economic
numbers we're seeing such as rising unemployment," said Shaun
Osborne, chief currency strategist at TD Securities in Toronto.
"Some are saying we could get a shocker (in payrolls). Some
people are talking about 1 million job losses for December."
YEN, STERLING ADVANCE
The euro rose 0.6 percent to $1.3718 <EUR=> after falling
to a session low of $1.3535, according to Reuters data.
The strong yen pushed the euro down 0.9 percent to 125.06
yen <EURJPY=>.
"The yen is still king for the day ... and that's basically
a risk-aversion trade," Scotia Capital's Tihanyi said. "We've
equity weakness again."
Sterling, meanwhile, bounced to three-week highs against
the dollar and euro after the Bank of England met market
expectations with a 50-basis-point interest rate cut to 1.5
percent.
"Most traders anticipated the 50-basis-point cut and were
relieved to see the BoE simply match expectations instead if
easing more aggressively," said Boris Schlossberg, director of
currency research at GFT in New York.
"Only a few weeks ago the consensus market call was for a
full 100 basis point cut, so given today's more modest response
the news can be viewed as victory for pound bulls," he added.
The pound rose as high as $1.5372 <GBP=>, according to
Reuters data. It last traded at $1.5242, up 0.9 percent. The
euro hit a low of 88.81 pence <EURGBP=D4>, its lowest since
mid-December and was last down 0.2 percent at 89.98 pence.
(Additional reporting by Gertrude Chavez-Dreyfuss; editing by
Gary Crosse)
