SYDNEY The U.S. dollar steadied in Asia on Thursday having veered lower overnight as investors trimmed back long positions into a U.S. holiday and a raft of potentially market-moving events, including the all-important payrolls report.
Dealers said political uncertainty in Portugal had sparked a sharp fall in euro/yen, which in turn lifted the Japanese currency across the board. But the move was impulsive and soon ran out of juice.
Early in Asia, the dollar had edged back up to 99.98 yen, from a low of 99.30, while the euro returned to 130.11 yen from a trough of 128.60.
The single currency also bounced from a $1.2921 low on the U.S. dollar to reach $1.3010, though not with a lot of conviction. The dollar index came off 0.37 percent to 83.218 .DXY.
Sterling was one of the biggest gainers as UK service data proved far stronger than expected <TOP/CEN>, lifting it over a full cent to $1.5276.
The biggest loser was again the Australian dollar which carved out a fresh three-year trough of $0.9037 amid speculation that interest rates could be cut next month. Yet the market is already hugely short of the currency and a bout of profit-taking helped it up to $0.9110 early on Thursday.
Overall, caution ruled given looming central bank meetings in the euro zone and UK and the market so hyper sensitive to the outlook for Federal Reserve policy.
No policy change is expected from the European Central Bank later on Thursday but a jump in yields in Portugal, and other periphery markets, should keep President Mario Draghi sounding dovish.
"Draghi is likely to emphasize that the growth outlook is still subject to downside risk, that the ECB is ready to act and that there are still tools in the toolbox," said JPMorgan analyst Greg Fuzesi in a note.
"Draghi will also say that the exit from the current policy stance is "very far away", "very distant" or some variant of this."
The Bank of England has its first meeting under new Governor Mark Carney, who took over just this week. There has been some speculation he would break with convention and release a statement even if the bank takes no action.
A swing higher in Treasury yields <US/> offered some support to the dollar while U.S. data was too mixed to offer guidance on when the Federal Reserve might start to taper its asset buying.
More important, of course, will be the payrolls report on Friday and there was much talk in the market about the tendency of the series to disappoint in June.
Over the last sixteen years the report has come in under expectations 75 percent of the time with an average miss of 70,000. In addition, four of the last five June releases have fallen short of expectations.
Forecasts for employment range from 125,000 to as high as 220,000, with a median at 165,000.
Elsewhere, events in Egypt lifted oil prices but had little impact in the forex market, said dealers.
"Currencies exposed to global energy, such as the JPY, have yet to reflect any discernible reaction," noted analysts at ANZ.
(Editing by Ian Chua)