* U.S. employment report at 1230 GMT in focus
* Sterling pressured by growing political uncertainty
By Rika Otsuka
TOKYO, June 5 (Reuters) - The dollar edged down against a
basket of major currencies on Friday, with investors shifting
money to higher-yielding currencies on the view that the
recession afflicting the world's major economies is easing.
Sterling was under pressure amid deepening political
uncertainty with a third senior minister quitting the British
government on Thursday and urging Prime Minister Gordon Brown to
step down to improve his party's chances at a general election
due within a year. []
But activity in Asia was subdued with traders and investors
cautious ahead of the U.S. Labor Department's May employment
report at 1230 GMT, which could dent optimism about the global
economy if figures turn out much worse than expected.
"Risk aversion moves are inevitable if something happens to
dampen hopes, as people have been taking more risks recently,"
said Minoru Shioiri, a senior manager of FX trading at Mitsubishi
UFJ Securities.
"But an overreaction in the market is also unlikely as
players are not taking as risky positions as they did a year
ago."
The dollar index, a gauge of the greenback's performance
against a basket of six currencies, slipped 0.1 percent to 79.390
<.DXY>. It hit the year's low of 78.334 on Tuesday.
The index was nearly unchanged on the week, having shed 6.6
percent in May as improving risk appetite and worries about
ballooning U.S. debt issuance led to a decline in safe-haven
demand for the dollar.
The euro edged up 0.1 percent from late U.S. trade to $1.4197
<EUR=>, crawling towards a five-month peak of $1.4339 hit on
trading platform EBS earlier this week.
The euro rose against the dollar and the yen on Thursday
after the European Central Bank left interest rates steady.
The ECB also reiterated plans to buy 60 billion euros ($85
billion) in covered bonds, which analysts said seemed to bolster
expectations that it will not cut interest rates anytime soon.
The Bank of England and Bank of Canada also kept their
benchmark interest rates unchanged on Thursday, supporting views
that the worst of the global downturn has passed. []
DEMAND FOR RISKIER CURRENCY
Such hopes encourage investors' appetite for risk, and were
keeping the yen, seen as the least risky currency, not far from
multi-month lows against the euro and the Australian dollar.
The euro climbed 0.4 percent to 137.31 yen <EURJPY=R>, a day
after it rose 0.7 percent following the ECB's rate verdict. It
remained within reach of a seven-month high of 138.02 yen struck
on EBS on Wednesday.
The dollar was up 0.2 percent at 96.73 yen <JPY=>.
Sterling was down 0.1 percent at $1.6123 <GBP=D4> after
falling as low as $1.6106 earlier, according to Reuters data.
Commodity-linked currencies held firm after oil hit a
seven-month high and gold jumped nearly 2 percent the previous
day. [] []
The Australian dollar rose 0.2 percent to $0.8038 <AUD=>,
consolidating after a wave of profit-taking knocked it off an
eight-month high of $0.8265 hit on Wednesday.
The U.S. economy is expected to have shed 520,000 jobs in
May, with the unemployment rate forecast to have risen to 9.2
percent from April's 8.9 percent. []
"Weak readings have already been factored in by the currency
market. In fact, the market will likely pay more attention to how
share prices react to the employment report," said Masaki Fukui,
a senior market economist at Mizuho Corporate Bank.
It could take shockingly poor figures to spark risk aversion,
analysts said, especially as investors are well aware that job
losses will not dramatically decrease in the near term after
bankruptcy filings by General Motors and Chrysler.
($1=.7040 Euro)
(Editing by Michael Watson)
