Dollar rallies across the board in London

The dollar rallied across the board on Friday as investors bet it would gain if US jobs data due at 1230 GMT comes in stronger than expected, while continuing concerns about the European banking sector stung the euro.
Analysts said some investors saw a possibility that US Treasury yields could rise on a strong payrolls figure if markets bet that an improving labour market could prompt the Federal Reserve to raise interest rates earlier than expected, even as many rule out any tightening for at least the next year.
Optimism about buoyant payrolls knocked the euro, which also came under selling pressure as an outline of measures to help weak European banks and a brief suspension of shares in Italian bank Unicredit highlighted banking sector problems in the region already rocked by the eurozone debt crisis.
Analysts said the market was largely focusing on the US data. After the ADP report, economists have lifted their forecasts to anywhere from 125,000 to 175,000 last month. "The market is positioning itself for an initial dollar rally on the expectation of a positive print on the payrolls," said Sebastien Galy, senior currency strategist at Societe Generale. "The problem with this approach is the risk of buying the rumour and selling the fact," he said, adding that the dollar may reverse those gains if equities rise on the data, which would be positive for riskier currencies including the euro.
The euro fell to a session low of $1.4228, retreating after climbing as high as $1.4370 in earlier trade. It was last down 0.7 percent for the day at $1.4260. Traders said selling by Russian names kick-started the euro's move lower, while stop-loss sell orders triggered around $1.4330 added to the downward momentum. The single currency then backed off the session low, with traders citing a Reuters report saying all five Italian banks covered in EU stress tests had passed, quelling some concerns about the Italian banking sector.
The dollar rose 0.4 percent to 75.243 versus a currency basket. Against the yen, it traded up 0.1 percent at 81.38 yen, holding gains from Thursday, when it rose to around 81.40 yen, its strongest in around a month. Traders highlighted a large option expiry at 81.30.
The dollar also rallied 0.5 percent against the Swiss franc, while gains against the Canadian dollar were checked by a stronger-than-expected Canadian employment release. Some analysts said the euro could be supported by increased risk appetite, after jumping on Thursday when the European Central Bank raised interest rates and signalled more to come, while offering to provide liquidity to Portugal regardless of its dismal credit rating.