* Euro at 4-mth high vs USD, yen on ECB rate rise view
* Dollar on back foot, investors await U.S. payrolls
* Analysts: UST yields need to rise on data to boost USD
By Naomi Tajitsu
LONDON, March 4 (Reuters) - The euro hit a four-month high
against the dollar on Friday on expectations euro zone interest
rates may rise next month, while investors waited to see whether
strong U.S. jobs data would offer the greenback some respite.
The central forecast in a Reuters poll was for 185,000 new
jobs to have been added to the economy last month, after an
addition of 36,000 in January. <ECONUS>
With the euro hovering just shy of $1.40, analysts looked to
movements in U.S. yields to drive the dollar after the jobs
data, due at 1330 GMT.
"We should see a better non-farm payrolls figure, but if
U.S. yields don't rise, it won't help the dollar," said Marcus
Hettinger, global FX strategist at Credit Suisse in Zurich.
"Interest rate differentials ... are playing in favour for
the euro, so we could see a break above $1.40 any time now."
The euro stayed well bid after European Central Bank
President Jean-Claude Trichet stunned investors on Thursday by
saying a rate rise in April was a possibility. []
The euro <EUR=> edged up to $1.3978 on trading platform EBS,
its strongest level since early November. Gains were capped,
however, with traders citing a barrier at $1.40 and offers to
sell the single currency looming just above there.
Analysts said the euro was poised for a move higher, though,
as the ECB's announcement, which fortified the view the ECB will
raise rates well before the Federal Reserve, had widened the gap
between euro zone and U.S. government bond yields.
At the same time, Paul Robinson, head of European FX
Research at Barclays Capital, said dollar risks were skewed to
the downside heading into payrolls and that the U.S. currency
could face more selling than usual if the figure comes in weak.
"What makes today's nonfarm payrolls data more interesting
is the very different views of the world held by the ECB and
Federal Reserve," he said.
ECB rate speculation has pushed yields on two-year German
government bonds <DE2YT=TWEB> -- the maturity most sensitive to
official rate moves -- roughly a full percentage point higher
than those of their U.S. counterparts <US2YT=RR> this week. The
spread between the two is now at its widest since January 2009.
Euro interest rate swaps soared across the curve with the
two-year rate <EURAB6E2Y=> hitting around 2.33 percent, highs
not seen since early 2009.
While rate speculation has boosted the euro, some analysts
pointed out the dangers of tightening policy when some euro zone
economies are suffering because of debt problems.
The euro had support above its 200-week moving average
around $1.3957, and a weekly close above that would pave the way
for a move higher. Near-term resistance was seen around $1.3980,
however, the 78.6 percent retracement of the euro's down-move
from November.
The euro also hit a five-month high against the yen
<EURJPY=R> of 115.55 yen, according to Reuters data.
BUY ON DIPS
Market participants acknowledged the euro may stumble if
European officials fail to reach a consensus on a lasting
solution to euro zone debt problems when they meet this month.
But some forex managers said they would be happy to pick up
the single currency if it dips on such concerns, as they were
confident political differences within the region were unlikely
to derail overall stability.
"We like the euro," said Thanos Papasavvas, head of currency
management at Investec, arguing that even the economies of some
weaker euro zone countries were starting to improve, while
Europe would eventually hammer out a permanent debt rescue plan.
He added: "We would be interested in increasing our euro
positions more on any correction to $1.34-35."
But the shared currency <EURCHF=R> slipped 0.3 percent on
the day to 1.2967 Swiss francs, which rallied after Swiss
National Bank Vice Chairman Thomas Jordan said rates in the
country will have to rise in the medium term. []
The dollar <JPY=> was up 0.3 percent at 82.69 yen, but was
at 76.493 against a currency basket <.DXY>, little changed on
the day and hovering near a four-month low hit on Thursday.
(Additional reporting by Niki O'Callaghan and Jessica Mortimer;
Editing by Catherine Evans)
