* Dollar index down 0.2 pct at 75.580 <.DXY>
* Markets on hold ahead of U.S. payroll data
* Dollar/yen upside capped by large options at 91 yen
* Sterling up 1 pct on week after BoE
By Tamawa Desai
LONDON, Nov 6 (Reuters) - The dollar eased slightly as firm
equity markets supported risk-taking sentiment, but activity was
muted ahead of a U.S. jobs report expected to provide more
insight into the state of the economy.
U.S. non-farm payrolls data is the last big event risk of
the week after a round of central bank decisions which largely
weighed on the dollar.
The U.S. jobs report, due out at 1330 GMT, is expected to
show a slower pace of job losses, but another rise in the
unemployment rate, traders said.
"If the payrolls number falls within expectations,
risk-taking appetite is likely to re-emerge," said Lee Hardman,
currency strategist at Bank of Tokyo-Mitsubishi UFJ.
"The dovish Fed statement this week has raised the bar for a
positive jobs number to lead to a higher dollar," he added.
"Only an extremely strong number (in the payrolls) or an
extremely weak number would help the dollar."
A Reuters poll showed median 175,000 U.S. jobs were shed in
October, slower than the 263,000 lost in September, with the
jobless rate rising to 9.9 percent. <ECONUS>
"Of key symbolic significance for investors today will be
the rate of unemployment, which may reach the 10 percent
psychological threshold, if not this month then probably in
November," said Lena Komileva, head of G7 market economics at
Tullett Prebon.
By 0855 GMT, the dollar index, which tracks the performance
of the greenback versus a basket of six other major currencies,
was down 0.2 percent at 75.580 <.DXY>.
The euro was flat on the day at $1.4893 <EUR=>.
The dollar fell after the Fed kept interest rates at record
lows on Wednesday and indicated they would stay there for some
time.
It lost further ground on Thursday after European Central
Bank President Jean-Claude Trichet sounded an optimistic note
about a 2010 recovery and hinted at a slow-motion exit strategy
for some emergency stimulus measures. The ECB kept rates steady
as expected.
Sterling gained after Bank of England expanded its
asset-purchase programme by 25 billion pounds on Thursday,
halving the pace at which it buys bonds and suggesting the
scheme may be coming to an end.
The pound was up 0.1 percent on the day at $1.6617 and on
track for a 1.2 percent gain this week.
The dollar was slightly weaker against the yen at 90.55 yen
<JPY=>, with the upside capped by a large amount of options with
a strike price of 91.00 yen set to expire later in the day.
Some traders said the yen may come under pressure after the
U.S. jobs data on growing concerns about Japan sovereign risk,
reflected in a blowout in the price of insuring debt.
Japan's 5-yr CDS widened to 67.2 in Europe Thursday
afternoon from 62.2 at the New York close, data from monitor CMA
DavaVision shows.
Ten-year JGB yields also hit 3-month highs on Friday as
concerns mounted over increased debt issuance and the new
Japanese government's ability to handle its spiralling debt.
Traders will keep an eye on Group of 20 finance ministers
and central bankers who start a meeting in Scotland on Friday,
although discussions on currencies are not on the formal agenda.
UK finance minister and G20 chair Alistair Darling told
Reuters in an interview G20 policymakers are agreed that it is
too early to pull the plug on economic life-support packages as
the global recovery is still fragile. []
On currencies, he said: "There is a lot of volatility in
exchange rates and other markets we have seen for perfectly
obvious reasons. I think this weekend people are looking at
medium and long-term issues."
