Dollar nurses losses as payrolls report looms

By Lisa Twaronite

TOKYO (Reuters) - The dollar steadied in Asian trading on Friday but remained on track for weekly losses, as investors braced for U.S. employment figures later in the session for the latest clues on the outlook for the Federal Reserve's monetary tightening path.

The greenback wallowed close to a two-week low against the yen, having erased its upward spike triggered a week ago by the Bank of Japan's move to adopt negative interest rates.

The key nonfarm payrolls report is expected to show that employers added 190,000 jobs in January, according to the median estimate of 108 economists polled by Reuters.

But figures released Thursday showed the number of Americans filing for unemployment benefits rose more than expected last week, suggesting labour conditions could be weaker than many believe.

"The charts suggest the short dollar/yen trade is still the advantageous trend trade, but with the non-farm payrolls tonight this data point may give a better entry point to sell strength in dollar/yen," Evan Lucas, market strategist at IG in Melbourne, wrote in a note to clients.

Recently weak U.S. economic data, as well as dovish comments from New York Federal Reserve President William Dudley, have led investors to pare bets on a steady pace of Fed rate increases. Fed funds futures contracts on Thursday suggested traderswere pricing in just a 10 percent probability of a Fed rate hikenext month and a 41 percent chance by the end of the year,according to CME FedWatch.

The dollar stood at 116.89 yen , up slightly from late North American trade but not far from Thursday's two-week low of 116.525 yen and poised for a weekly loss of around 3.5 percent.

The euro edged down around 0.1 percent to $1.1197 after surging 1 percent overnight to a 15-week high of $1.12390. The single currency was up 3.3 percent for the week.

Sterling, meanwhile, gave up some of its overnight gains. It had surged to a one-month high after comments from Bank of England chief Mark Carney quashed talk that interest rates could be cut in the coming months and led to a squeeze of short-pound positions. [

Sterling was last trading down about 0.1 percent at $1.4576 , from its Thursday high of $1.4672 but still on track for weekly gains of more than 2 percent.

(Editing by Shri Navaratnam)