* Dollar holds above 7-week low in wait for U.S. payrolls
* Much uncertainty on jobs, could break recent ranges
By Charlotte Cooper
TOKYO, Sept 4 (Reuters) - The dollar dipped against the yen
but held above this week's seven-week low on Friday as investors
hunkered down to await U.S. non-farm payrolls later in the day.
The market is uncertain how the dollar will react to the
August non-farm payrolls report due at 1230 GMT, after it lost
its toehold above 93.00 yen at the start of this week and hit its
lowest since mid-July just above 91.90 on Thursday.
Traders in Tokyo have watched its fall and are wondering
whether the jobs numbers will be a trigger for another drop
touching off automatic sell orders expected from short-term
speculators below 92.00 and around 91.50 yen.
"Payrolls could have a definitive impact," said David Watt,
senior currency strategist at RBC Capital Markets in Australia.
"Preliminary indicators, however, are on balance consistent
with the consensus. Hence, anything could be a surprise and the
dollar could be in for a jolt either way."
A weaker-than-expected report could feed risk aversion, boost
Treasuries and so aid the greenback.
A marked improvement could encourage risk-taking and aid
commodity currencies like the Canadian and Australian dollars at
the U.S. dollar's expense, or, confusingly, it could also be seen
as a sign of relative U.S. economic strength and lift the dollar.
The latest forecast is for a drop of 225,000 in payrolls with
the jobless rate at 9.5 pct []. But estimates range from a
drop of 100,000 to as much as 365,000.
The dollar dipped 0.1 percent from late U.S. trading on
Thursday to 92.59 yen <JPY=>, and was capped by offers between
92.80 and 93.05, market players said. The greenback hit a
seven-week low of 91.94 yen on trading platform EBS on Thursday.
The dollar might rise to around 94 yen if the jobs data comes
in strong, but any gains will probably be short-lived, said a
trader for a Japanese brokerage.
"Even if the jobs data turns out to be pretty good, I think
all that will happen is some short-covering and then that will be
it," he said, adding that the dollar may then edge lower against
the yen as it did after hitting an eight-week high of 97.79 yen
on trading platform EBS in early August.
A trader at a Japanese bank said short-term players were
short the dollar/yen but dollar buying in options-related hedging
was slowing its fall -- and not everyone expected it to weaken.
"When you consider interest rate differences and economic and
political fundamentals, there's no reason to buy yen -- that's
what people say," the trader said.
Against a basket of currencies <.DXY> the dollar was steady
at 78.440, after bouncing from a 77.997 low on Thursday.
Analysts at RBC said it sat at a critical juncture, defined
by two trendlines. One, an ascending support off the July 2008
low at 77.90; the other a descending resistance off the early
March high at 78.70.
These were converging fast toward 78.31, the 61.8 percent
retracement of the rally from July 2008 to March 2009. The
payrolls report could break the range.
The euro dropped 0.1 percent to 131.94 yen <EURJPY=R>, up
from a dip to 131.01 yen on Wednesday, its weakest since
mid-July. One trader said offers were expected at 132.40
<EURJPY=R> and above.
It was steady at $1.4252 <EUR=>, down from levels above
$1.4300 on Thursday after European Central Bank President Claude
Trichet sounded less hawkish than some expected.
The ECB held interest rates at a record low 1.0 percent and
warned that now was not the time to withdraw state support as
economies emerge slowly from recession [].
Still, traders reported good support under $1.4200 which
should hold into the jobs report, while offers were expected at
$1.4300 and above.
On Friday, the Aussie dollar was steady at $0.8394 and dipped
0.1 percent to 77.67 yen <AUDJPY=R>.
It had been the biggest mover on Thursday, rising 0.6 percent
to $0.8392 <AUD=D4>, helped in part by a bounce in stocks.
It also got a boost from a jump in spot gold to $997.00 an
ounce <XAU=> on Thursday, though dealers were puzzled by the
metal's rally given the U.S. dollar was up and stocks gained.
(Additional reporting by Wayne Cole in Sydney and Masayuki
Kitano in Tokyo ; Editing by Joseph Radford)
