* Euro shaky as euro zone debt worries resurface
* Market expectations high for U.S. non-farm payrolls data
* USD seen vulnerable to any disappointment in the numbers
* Euro nears stops below $1.2950, talk of bids at $1.2920
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, Jan 7 (Reuters) - The euro dropped to a
four-month low versus a broadly firmer dollar on Friday ahead of
U.S. jobs data, which is expected to provide more evidence of a
stronger U.S. economic recovery.
A sell-off in peripheral euro zone government bonds before a
flurry of supply next week and an EU proposal that could force
those who lend to banks to bear big losses should they fail
helped knock the single currency lower. []
The euro extended losses after sliding more than 2 percent
over the two previous days and briefly dipped below support at
the $1.2970 area -- lows hit in late November and early
December.
"A break below here will open downside potential towards
$1.2590," BNP Paribas strategists wrote in a note, referring to
the euro's next significant trough on charts, marked in late
August.
While the euro would likely get some respite if the U.S.
jobs data disappoints, any gains could turn out to be
short-lived, said Robert Ryan, FX strategist at BNP Paribas in
Singapore.
"If we don't get a big payrolls number the dollar is going
to get whacked. I mean if it's below 100,000," Ryan said.
"That should see the euro trade up in response, but then we
don't see a sustained gain in the euro," Ryan said.
"If payrolls come in very weak, yes the dollar is in trouble
but the euro zone is just as much in trouble. We still see it
easing," Ryan added.
A surprisingly big increase in U.S. jobs, such as 300,000 or
more, would boost the dollar and could also change the outlook
for the global economy, Ryan said.
But such a scenario would also be positive for peripheral
euro zone countries and help temper a sell-off in their
government debt, and could eventually limit the euro's decline,
Ryan said.
The euro dipped as low as $1.2965 on trading platform EBS,
its lowest since mid-September and not far from stop-loss offers
said to lie below $1.2950.
Traders, however, said there was talk of good bids for the
euro at $1.2920, right near a cluster of intraday highs hit
between mid-August to early September that now act as support.
The euro later trimmed its losses and stood at $1.2992
<EUR=>, down 0.1 percent from late U.S. trade on Thursday.
The dollar benefited from weakness in the euro and remained
buoyed by the ADP report, which showed a record number of
private sector jobs were created in December.
This prompted analysts to upgrade their forecasts for
non-farm payrolls to increase 175,000, up from 140,000 in an
earlier Reuters survey. Some in the market are far more
ambitious, looking for an increase of more than 450,000.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphics:
ADP vs the Labor Department: http://r.reuters.com/sev94r
Jobless claims: http://r.reuters.com/sev94r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The dollar rose 0.2 percent against a basket of major
currencies to 80.956 <.DXY>.
The dollar advanced 0.2 percent to 83.50 yen <JPY=> after
rising as high as 83.57 yen on EBS, its highest in two weeks.
This was partially driven by dollar demand from hedge funds,
traders said.
Dollar offers from Japanese exporters were said to be
lurking above 84.50 yen, right around the greenback's
mid-December peak of 84.51 yen.
Macquarie bank analysts said increasing signs that a strong
economic upswing is underway in the United States should provide
support for the greenback over the first half of 2011.
"Beyond this, however, we think the USD could come under
pressure again as the U.S. government's ever-growing budget
deficit comes under increased scrutiny."
(Additional reporting by Kaori Kaneko in Tokyo, Reuters FX
analyst Krishna Kumar in Sydney; Editing by Joseph Radford)
