FOREX-Euro leaps as ECB stays course; dollar stays weak
* Comments by ECB's Draghi buoy euro
* ECB keeps rates unchanged
Weak U.S. private-sector jobs data weighs on dollar
* Dollar under pressure given U.S. political deadlock
By Julie Haviv
NEW YORK, Oct 2 (Reuters) - The euro soared to an eight-month high versus the dollar on Wednesday as European Central Bank President Mario Draghi stuck with the bank's current stance on monetary policy and said the ECB is prepared to do more should the economy warrant it.
The ECB left interest rates unchanged, holding off on any fresh policy action for now while it waits to see whether a fragile euro zone recovery strengthens.
Draghi's overall assessment of the economy remained largely unchanged from a month ago and he did not express concern about the euro's recent strengthening, leaving the door open to pumping more ultra-cheap loans into the market.
"The exchange rate is not a policy target for the ECB. The target for the ECB is medium-term price stability," Draghi said.
The euro rallied on Draghi's comments, hitting a peak of $1.3606., its highest since February. In late-morning New York trade is traded at $1.3594, up 0.5 percent on the day, its largest one-day percentage gain since Sept. 18.
"The euro's rally has more to do with what Draghi did not say than what he did say," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.
"There was not much change to his stance and it removed the uncertainty headed into the meeting that he would sound more dovish," she said.
Prior to Draghi's remarks, the ECB said it would keep its main refinancing and deposit rates on hold, as widely expected.
The euro earlier found support on growing signs Italian Prime Minister Enrico Letta would survive a confidence vote, which he subsequently did, after center-right leader Silvio Berlusconi backtracked on attempts to bring down the government and said his party would support Letta.
The dollar index, which tracks the greenback against a basket of six major currencies, fell as low as 79.781, its lowest since February. It last traded 0.4 percent lower at 79.862. The euro dominates the composition of the index.
Against the yen, the greenback last traded down 0.7 percent at 97.34 yen. It earlier slid to 97.12 yen, its lowest since late August.
The dollar remained subdued as the ongoing political wrangling in the United States, which has led to a partial government shutdown, showed no signs of a resolution.
President Barack Obama on Wednesday scrapped part of a long-planned trip to Asia and left the remainder in doubt as the shutdown went into a second day with no end in sight to the funding battle in Congress that triggered it.
"The U.S. political turmoil is just starting to permeate markets," said Christopher Vecchio, currency analyst at DailyFX in New York. "There are also fears that the funding showdown could spill over into a cantankerous debt ceiling fight."
With the 97.50 yen level having been cleared, dollar/yen could reach the August lows of 96.80/90 for support in the near term, he said.
The dollar was earlier weighed down by weaker-than-expected labor market data. The U.S. private sector added 166,000 jobs in September, according to ADP.
Should the U.S. government remain shut through Friday, the September nonfarm payrolls report from the Labor Department, a key factor in Federal Reserve policy, will be delayed.
The path of Fed policy hinges on U.S. data, so signs of strength in the labor market benefit the dollar as it raises expectations that the U.S. central bank will taper its $85 billion-a-month bond-buying program in the coming months.
The yen, which tends to benefit in times of market turmoil, also rose against the euro, but the euro zone common currency pared losses after Draghi's comments, last trading down 0.1 percent at 132.34 yen, according to Reuters data.