* Dollar mostly flat ahead of August U.S. jobs report
* Trading ranges very tight; options expiries also in focus
* Dollar reaction key to risk sentiment in coming weeks
(Adds detail, updates prices)
By Jamie McGeever
LONDON, Sept 4 (Reuters) - The dollar was little changed on
a trade-weighted basis on Friday ahead of U.S. employment
figures that could set the tone for the greenback -- and other
financial markets -- for the rest of the month.
Trading ranges across major currency pairs were tight in
Europe, with investors reluctant to put on big positions ahead
of the August non-farm payrolls data. <ECON>
The euro recovered some of its losses the previous day
triggered by comments from European Central Bank President
Jean-Claude Trichet suggesting the outlook for growth, inflation
and credit conditions will keep policy and therefore market
interest rates low for some time.
And the dollar inched back up from its seven-week low
against the yen struck earlier this week, supported by gains in
European equity markets, U.S. stock futures and two-year U.S.
Treasury bond yields.
"There's been a degree of recovery in risk appetite ... and
and there's been a very strong interest from (Japanese)
importers to buy dollars at these low levels," said Derek
Halpenny, senior currency economist at BTM-UFJ in London,
referring to dollar/yen.
The focus is firmly on the U.S. dollar and how it reacts to
the U.S. jobs figures. A weaker-than-expected report may trigger
dollar selling or alternatively burnish the currency's
safe-haven status in a climate of rising risk aversion.
"The episode will be critical in judging the extent to which
the expected regime switch, from risk cycle to business cycle
trading, is proceeding. We expect the dollar to strengthen once
market focus shifts to the likely outperformance of the U.S.
economy," Citigroup strategists said in a note on Friday.
At 1113 GMT, the dollar index was little changed on the day
at 78.36 <.DXY>.
The dollar was up 0.2 percent against the yen at 92.80 yen
<JPY=>, rebounding further from Thursday's seven-week low just
under 92.00 yen, and the euro was up 0.3 percent at 132.45 yen
<EURJPY=R>.
But it fell nearly 1 percent on the day against the Canadian
dollar, which rallied as high as C$1.0922 <CAD=D4> following an
unexpected rise in employment in Canada in August.
[]
OPTIONS OVERLOAD
Traders noted dollar/yen options expiries worth over $1
billion later on Friday, including strikes worth $800 million at
91.60 yen.
The euro was flat at $1.4260 <EUR=>, capped by good
technical-related selling at the 100-day moving average of
$1.4282 and options-related selling ahead of large expiries
later in the day at $1.4300.
There are also large euro/dollar options strikes at $1.4400
rolling off after the U.S. jobs data on Friday, traders said.
"It's a very large expiry list today, probably the biggest
of the year so far ... so this might start to have the 'magnet
effect' on spot if payrolls does not surprise either way," said
one trader in London.
The latest forecast is for a drop of 225,000 in payrolls
with the jobless rate inching up to 9.5 pct []. But
estimates range from a fall of 100,000 to a 365,000 decline.
Other areas of focus included the meeting in London this
weekend of finance ministers from the Group of 20 rich and
developing nations.
G20 policymakers will promise to keep economic support
packages in place until recovery is certain and seek to reassure
financial markets they have credible plans to withdraw the
stimulus when appropriate. []
This was a theme stressed by Trichet on Thursday after the
ECB kept interest rates at a record low 1.0 percent.
His announcement that the rate at the ECB's tender of
unlimited one-year funds later this month would be kept at 1
percent [] pushed down short-term rates and yields,
and steepened the yield curve.
Trichet said in a speech in Frankfurt on Friday that the ECB
could raise rates before it fully exits its non-standard
liquidity provisions, although now was not the time to start
such an exit strategy [].
(Additional reporting by Naomi Tajitsu; Editing by Ruth
Pitchford)
