LONDON: The dollar steadied after hitting a seven-year high against the yen on Thursday as traders sold into a steep rally ahead of a European Central Bank meeting later in the session and US nonfarm payrolls data on Friday.
The euro stayed near a two-year trough against the greenback as investors awaited the ECB's decision and its president Mario Draghi's press conference at 13.30 GMT.
Draghi is likely to be quizzed about a Reuters report that some national central bankers in the euro area planned to challenge him over what they see as his secretive management style and erratic communication.
The dollar was flat at 114.62 yen after storming to a seven-year high of 115.52 on trading platform EBS overnight.
Traders said the greenback was taking a pause after rallying around 5 percent against the yen since the Bank of Japan surprised markets by increasing its already massive monetary stimulus programme last Friday. The dollar index inched down 0.1 percent to 87.359, having hit a 4-1/2 year peak of 87.606 on Wednesday.
The euro last traded up 0.1 percent at $1.2499, flirting with a two-year low of $1.2439 set early in the week.
Disappointing surveys of euro zone business growth, as well as the BoJ's surprise action, have added pressure on the ECB to ease more.
But most investors expect the central bank to hold off from announcing any further policies this month, waiting instead for its already-announced stimulus to unfold.
"It's always a little odd when you start rolling out programmes on top of others -- it smacks of panic and that's certainly not what the ECB would want to portray," said Neil Mellor, an FX strategist at Bank of New York Mellon in London.
"But I believe that it is now ECB policy - albeit unofficial policy -- that the ECB wants the euro to weaken, because it's the path of least resistance," Mellor said. "It is just a question of how far the euro will drop now."
COMMODITY CURRENCIES HIT
Soft data out of Europe again contrasted with more upbeat news from the United States, where private employers added 230,000 jobs in October, marking a record seven straight months of job gains exceeding 200,000.
The upbeat US data fanned expectations of a strong reading on Friday of the closely watched nonfarm payrolls report.
Longer term prospects for the yen remained bearish after BOJ Governor Haruhiko Kuroda said the central bank was ready to do even more to hit its 2 percent inflation goal and recharge a tottering economy after last week's shock easing.
Currencies of commodity-producing countries continued retreating as global growth concerns dampened demand for exports such as crude oil and iron ore.
The Australian dollar fell to a four-year low of $0.8553 against the US dollar in Asian trading, as iron ore -- Australia's major export -- fell to a five-year low amid cooling demand from key importer China.
BNP Paribas strategists said weakness in the Australian dollar was overdone, and that long positions funded in euros or yen should do well as the BOJ and ECB keep policy loose.
The Norwegian crown has also retreated steadily, losing almost 5 percent in the past month, as the price of crude oil -- Norway's main export -- has plummeted, hitting a four-year low this week.
The euro fetched 8.5387 crowns, up 0.1 percent, having hit a five-year high of 8.679 on Wednesday.
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