Dollar advances as dealers look to US jobs data

LONDON, Dec 7, 2007 (AFP) - The dollar rose against the euro on Friday before a keenly-awaited US jobs report that could prove pivotal for the outcome of next week's Federal Reserve interest rate meeting, analysts said.

In early European trading, the euro fell to 1.4621 dollars from 1.4633 dollars late on Thursday in New York.

Elsewhere, the dollar rose to 111.41 yen from 111.38 late Thursday.

The market was on tenterhooks ahead of US non-farm payrolls data for November due out later Friday, looking for clues on how much the Fed is likely to cut interest rates by at its next meeting on December 11.

"Today is really all about the US payrolls number as it will likely shape the market's Fed expectations for next week," said ABN Amro currency analyst Dustin Reid.

The benchmark Fed funds rate currently stands at 4.50 percent. Market views are divided on whether the central bank will cut rates by another 25 basis points or 50 basis points next week.

"Even if the payrolls data comes out strong, the Fed will still lower rates by 50 basis points because it is trying to revive market optimism and risk appetite," said Ryohei Muramatsu, manager of Commerzbank's Group Treasury Asia.

The dollar was also boosted Friday by a US plan to provide relief to struggling US homeowners, dealers said.

The White House on Thursday unveiled a scheme to allow struggling US homeowners with subprime, or risky mortgages, to re-finance adjustable-rate loans or freeze their current interest rates for five years.

"The proposal to help subprime borrowers will revive the US housing market and combined with a rate cut, will help the economy to pick up," said Mark Wan, chief analyst at Hang Seng Investment Services Ltd.

The dollar had weakened slightly on Thursday after the European Central Bank held its main lending rate at 4.0 percent and raised its inflation forecasts, prompting speculation about a possible future rate hike, dealers said.

The Bank of England on Thursday cut its key interest rate by a quarter-point to 5.50 percent amid signs the domestic housing market is cooling as credit tightens.

In European trade on Friday, the euro changed hands at 1.4621 dollars, against 1.4633 late on Thursday, at 162.90 yen (162.84), 0.7211 pounds (0.7215) and 1.6537 Swiss francs (1.6533).

The dollar stood at 111.41 yen (111.28) and 1.1311 Swiss francs (1.1295).

The pound was at 2.0278 dollars (2.0278).

In London, the price of gold slid to 799.80 dollars per ounce from 801.50 dollars late on Thursday.