The dollar hovered in range of a record low against the euro on Friday before crucial US economic data due later in the day that will offer hints on how close the US economy is to a recession.
Traders are looking to US non-farm payrolls and a reading of factory activity to help them determine whether to keep dumping the dollar, which tumbled to its weakest in nearly three years against the yen last month.
Currencies were little changed as investors were reluctant to place bets either way. A slide in Japanese stocks amid gains in other Asian equities markets did little to offer a clear gauge of risk appetite in financial markets.
The US currency has been stung by two hefty interest rate cuts by the Federal Reserve in less than 10 days, along with ongoing concerns about credit problems and signs of serious economic weakness.
"Basically, the payrolls figures must be very strong to spur any significant dollar buying," said Hideaki Inoue, a forex manager at Mitsubishi UFJ Trust and Banking.
Expectations are for a gain of 80,000 non-farm payroll jobs in January, compared with a paltry 18,000 in December, which had fuelled expectations that the economy was on the brink of recession.
The dollar hovered around 106.40 yen, little changed from late New York trade, but off the previous day's low of 105.71 yen hit on electronic trading platform EBS.
Traders said a weak jobs reading may push the dollar back into the 105 yen region and closer to 104.95 yen touched last month for the first time since May 2005, as it would ratchet up speculation that a recession is looming.
At the same time, some market participants said a strong figure would show that employment is holding up despite a struggling housing sector and sputtering consumer sector, and may push the US currency up towards 108 yen.
The euro was little changed and hovered near $1.4865, in range of a record high of $1.4968 hit on EBS in November.
The euro was steady against the yen at 158.16 yen
The Nikkei share average slipped 0.4 percent, while most other Asian stock indexes edged higher.
Many investors look at stock moves to assess the market appetite for risky positions, which include trades to sell the low-yielding yen for assets in higher-yielding currencies. A climb in stocks often spurs risk taking, while a slide tends to cool such demand.
Overall, stock market movements have calmed following a frantic sell-off last month spurred by fears of a US recession, which prompted an emergency, 75-basis-point rate cut by the Fed last week.
The US central bank followed up that move by slashing rates by half a percentage point to 3.0 per cent earlier this week, leaving the fed funds rate the lowest among developed countries save Japan and Switzerland.
Market participants were also waiting to see whether more US bond insurers suffer a chop in credit ratings as many have been stung by ongoing credit problems.
Signs that bond insurers have become the latest casualty of crumbling credit markets has ratcheted up pressure to sell the dollar in recent weeks.
MBIA Inc, the world's biggest bond insurer, on Thursday said it suffered $3.5 billion in write-downs linked to US subprime mortgages, while posting a record quarterly loss.
At the same time, it assured investors that it was working towards bolstering its capital and retaining its current credit rating. (Reuters)
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