* Japan's November output plunges record 8.1 pct
* BOJ expected to ease policy further in January-March
* Thin trading as many Asian, European markets closed
(Recasts, adds comments, changes byline and dateline, previous
TOKYO)
By Vivianne Rodrigues
NEW YORK, Dec 26 (Reuters) - The dollar was lower against
the euro and little changed versus the yen on Friday amid a
grim outlook for the U.S. economy at the start of 2009 and as
trading thins out ahead of the year end.
The yen dipped against the euro in Asian trading after data
showing a sharp slowdown in Japanese inflation underscored
fears the world's second-largest economy could sink back into
deflation next year.
Friday was the last business day for many Japanese firms
this year and their offices will remain shut until Jan. 5.
Volumes were also lighter than usual with most Asian and
European markets closed. Trading resumed in the United States
after being shut for Christmas on Thursday.
Low volumes ahead of the year end was leaving most major
currency pairs confined to narrow ranges, analysts said.
"The foreign exchange market is quiet, with the dollar
sporting a softer profile, but range trading continues to be
the dominant story," said Marc Chandler, global head of
currency strategy at Brown Brothers Harriman in New York.
In morning trading in new York, the euro was 0.4 percent
higher at $1.4060 <EUR=>.
The euro has been confined to ranges of between $1.3903 and
$1.4125 this week, Chandler added.
"Although thin market conditions may make for some whippy
trading, in general over the coming sessions, the risk is that
the euro's range is extended to the upside," he said.
The euro earlier rose versus sterling to a record high of
95.78 pence <EURGBP=>, according to Reuters data, before paring
gains to trade at 95.60 pence, up 0.7 percent on the day.
The single currency was also supported by expectations that
the European Central Bank will lower interest rates further
from the current 2.5 percent but at a slower pace.
Against the yen, the European single currency strengthened
to 127.12 yen <EURJPY=> from around 126.65 yen.
Japan's annual core consumer inflation slowed to 1.0
percent in November from 1.9 percent in October, government
data showed on Friday.
In a sign of more trouble for an economy already in
recession, Japan's industrial output plunged a record 8.1
percent in November, while the ratio of jobs available to job
seekers fell to a nearly five-year low. []
"Simply miserable data from Japan," Chandler said. "The
market knew conditions had deteriorated, but did not appreciate
the magnitude. The increasingly unpopular government has
already announced two modest fiscal stimulus plans...more needs
to be done."
The Bank of Japan last week lowered interest rates to close
to zero, mirroring steps by the U.S. Federal Reserve, and moved
to pump funds into the market to ease a corporate credit
crunch.
A Reuters poll showed on Monday that the BOJ is expected to
adopt quantitative easing in January-March, further easing
monetary policy to combat a deepening recession. []
The U.S. currency climbed as high as 90.83 yen earlier
according to Reuters data, but was last little changed at 90.42
<JPY=>. The greenback was on track for its first weekly rise
against the yen since the week to Nov. 9, when it rose about
0.5 percent.
Still, the dollar failed to hold on to earlier gains
against the yen as investors are more concerned about the
health of the world's biggest economy, traders said.
"Some players have sold the dollar, believing the U.S.
currency will resume its slide as soon as U.S. and European
investors return from holidays next week," said a forex trader
at a big Japanese bank.
U.S. data on Wednesday showed consumers cut their spending
in November for the fifth straight month and orders for costly
manufactured goods slumped, while the number of workers filing
new claims for jobless benefits last week hit a 26-year peak.
[]
(Additional reporting by Rika Otsuka in Tokyo. Editing by
Leslie Adler)
