The euro stayed close to a four-year low today, hemmed in by options expiries with debt problems weighing on sentiment, while the dollar gained support on expectations of a strong US employment report.
The single currency has tumbled around 17 per cent from its early 2010 highs as the crisis stemming from indebtedness of some euro zone countries escalated, fuelling concerns over the health of the currency area's banking sector.
"The euro remains under pressure. Even if US jobs come in weaker than expected, it's likely there will just be a short-term correction to the upside for the single currency," said Antje Praefcke, currency strategist at Commerzbank.
A Reuters poll forecast 513,000 US jobs were created in May but some in the market are anticipating an even stronger figure following upbeat data this week.
Data yesterday showed US private employers added 55,000 jobs in May and on Wednesday president Barack Obama said he expected the non-farm payrolls report to show strong jobs growth.
A robust number would fuel expectations the Federal Reserve will move first in tightening rates, ahead of the Bank of Japan, which is tackling deflation, and the European Central Bank.
The euro was trading with small gains against the dollar at $1.2200 this morning, not far from a four-year low of $1.2110 hit earlier in the week.
Large option structures expiring on the Chicago Mercantile Exchange were likely to keep the price action contained.
Traders said there was also a huge double-no-touch structure with a $1.21-$1.25 range set to expire later in the day, which could keep the currency bottled up.
They were looking for a daily close under the 50 per cent retracement of the 2000-2008 euro rally at $1.2135 to signal the next leg to the downside.
The dollar was slightly weaker on the day versus a currency basket at 86.937, staying close to a 15-month high hit on Tuesday at 87.473.
The greenback stood at 92.80 yen, steady from late US trade. The greenback rose as high as 92.87 yen in early Asian trade, its highest in more than two weeks.
The euro was up 0.5 per cent at 113.27 yen, staying well above an 8 1/2-year trough hit below 109 yen last week.
Reuters