Euro heads for record run lower; U.S jobs data eyed

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(Update 3: Fri 05/09/14 20:07:12)

LONDON/SYDNEY/SINGAPORE (Sept 05): The euro was set to record its longest ever losing streak against the dollar on Friday after failing to recover from a cut in official interest rates a day earlier, leaving it on course for an eighth week of losses.

The euro plummeted 1.6 percent on Thursday - its steepest fall in almost three years - to a 14-month low of $1.2920 after the European Central Bank cut rates to new lows and launched an asset purchase programme to ward off deflation.

The single currency inched up 0.1 percent on Friday at $1.2962, still firmly below $1.30. It would be the first time the euro has fallen for eight consecutive weeks since its introduction in January 1999.

Traders awaited U.S. non-farm payroll numbers due at 1230 GMT, expected to show the pace of job creation picking up slightly in August, as well as wage data which is also expected to show a slight rise in earnings.

"If we get a strong U.S. payrolls number this afternoon, and I suspect we will, as well as a mild pick-up in wage growth, that will give the dollar a further lift going into the start of next week, " said Kit Juckes, global head of currency strategy at Societe Generale.

"There's a reasonably high chance, despite the market positioning, that we try to push the euro down even further now," he said, adding that the timing of ECB chief Mario Draghi's stimulus announcement had been "very good in terms of weakening the currency".

ECB Governing Council member Ewald Nowotny said in an interview with Austrian broadcaster ORF on Thursday that the central bank cut interest rates in part to help weaken the euro.

Nowotny added that a euro/dollar rate around $1.30 or slightly lower was "going in the right direction" but declined to say where he would like to see the euro.

Though the ECB's announcements came as a shock to most, some were hoping the bank would signal it was moving towards full-scale quantitative easing — effectively the printing of money.

"The measures were designed to target a weaker euro, but within the price there is still some assumed element of full-blooded QE and that seems to be as remote as ever," said Neil Mellor, a currency strategist at Bank of New York Mellon. "So I do wonder about the risks of a rebound higher (for the euro)."

Upbeat data from Germany on Friday, showing industrial output in the euro zone's biggest economy increased by the most in almost 2-1/2 years in July, failed to boost the common currency.

Dollar strong

The drop in the euro pushed the dollar index to a 14-month high of 83.943 earlier on Friday. It last stood at 83.751, down 0.1 percent on the day.

Against the yen, the dollar touched a near six-year high of 105.71 yen. The dollar last traded at 105.22 yen, up 0.1 percent from late U.S. trade on Thursday.

Hopes for a highly anticipated asset reallocation by Japan's Government Pension Investment Fund (GPIF) continued to weigh on the yen, according to Bart Wakabayashi, head of foreign exchange for State Street Global Markets in Tokyo.

"It's not just a dollar-buying market. There's a solid story on the other side too, and that makes it easier to buy the dollar against the yen," Wakabayashi said.

The dollar was also up 0.1 percent against sterling at $1.6307. The pound was heading for its worst week in a year on worries that a vote later this month will see Scotland split from the rest of the UK.