The euro wallowed near a nine-year low as speculation grew that the European Central Bank will embark on quantitative easing soon and US jobs data will be good enough to cement the case for a rate hike by the Federal Reserve.

ECB president Mario Draghi said the bank's governing council stands ready to take unconventional measures to stem prolonged low inflation, fuelling expectations of a policy move at the bank's meeting on January 22nd.

The euro stood at $1.1806, near a nine-year low of $1.1754 reached on Thursday and close to $1.1747, the level at which it began trading in January 1999. Numbers released on Friday by the euro zone's two biggest economies, France and Germany, only darkened the outlook for the 18-nation currency bloc.

Industrial output declined in both countries and German exports fell sharply. Also weakening the euro was concern that a January 25th Greek general election will lead to a stand-off between Berlin and Athens over austerity policies imposed on Greece as a condition of its international bailout.

But the main focus on Friday was US nonfarm payrolls, which are expected to rise again, extending the longest run of job creation on record. "A nonfarm payroll number in line with our expectations (of a surprisingly large gain) will very much put back onto the market's radar that the Fed will be hiking mid-year," said Michael Sneyd, a currency strategist at BNP Paribas in London.

"Currently, market pricing is beyond that so there's still a lot of scope for US yields to rise and for that to continue to provide support for the US dollar." The dollar index edged down 0.2 per cent to stand at 92.196, within sight of its 2005 peak of 92.630. "The dollar index is likely to rise beyond the 2005 peak. But to rise well beyond the peak, we will likely need to see further widening in yield gaps (between the dollar and other currencies)," said Minori Uchida, chief FX strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo.

Reuters