Dollar Holds Steady Ahead of Jobs Report

The dollar held steady against a basket of currencies Thursday, a day ahead of a key government jobs report that will shed light on the health of the U.S. economy.

The euro earlier got a boost after European Central Bank President Jean-Claude Trichet presented an optimistic tone on euro zone growth, saying the economy will recover next year Both the ECB and the Bank of England left interest rates unchanged on Thursday.

The decisions came after the U.S. Federal Reserve on Wednesday held borrowing costs near zero percent and kept its commitment to low rates for an "extended period."

With the central bank meetings out of the way, investors turned their attention to Friday's U.S. jobs data. The economy likely lost 175,000 jobs in October, while the jobless rate rose to 9.9 percent, according to economists polled by Reuters.

"We should be relatively subdued today given the fact that we have this very important number out tomorrow," said John McCarthy, director of foreign exchange at ING Capital Markets in New York.

"This is really going to be a far more serious indicator of the relative health of the U.S. economy. Until you see jobs recover, you are not going to get any sustainability in the economic turnaround, nor are you going to get any reason for the Fed to tighten," he added.

The ICE Futures U.S. dollar index, a measure of the greenback against a basket of six currencies, was up at near 75.

The euro hit as high as $1.4917, according to Reuters data. It last traded down at about $1.48, above a session low of $1.4810.

Trichet, speaking after the ECB held interest rates at a record low 1.0 percent, said the latest evidence suggests a pick-up in activity in the second half of this year. He also said extra liquidity measures would be withdrawn in a timely manner.

The dollar was down at around 90 yen , while the euro was down at about 134 yen .

Stock, Dollar Correlation Breaks

The inverse relationship between the dollar and equities was showing signs of breaking down on Thursday, with a rally in stocks on Wall Street failing to pressure the dollar.

For much of the past year, the dollar has tended to fall when stocks rise, with increased risk appetite eroding the greenback's safe-haven appeal.

Some analysts attributed the breakdown to profit-taking on short dollar positions built up in recent weeks and position squaring ahead of the jobs data and a meeting of Group of 20 countries on Friday and Saturday.

"Going into the nonfarm payrolls, the risk is obviously to the downside," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.

"I don't think anybody is expecting a substantial improvement in the job market and the unemployment has a serious potential of breaking 10 percent tomorrow, and that could be very negative for the risk sentiment," he added.

The pound earlier jumped more than a full cent to hit a two-week high against the dollar after the UK central bank raised its asset buying but by less than some expected.

Sterling was up at near $1.65 after rising to $1.6637.

The Bank of England left interest rates unchanged at a record low of 0.5 percent and expanded its asset-buying scheme by 25 billion pounds. Two-thirds of analysts had predicted the BoE would expand its asset-buying scheme, but opinion had been split on whether the increase would be 25 billion or 50 billion pounds.

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