Sterling firm against dollar

LONDON: Sterling rose against the dollar on Friday after US jobs numbers beat forecasts and provided relief to investors who had braced for data that could back views that the United States was heading towards recession and boost safe-haven currencies.

The pound was steady against the euro, which was marginally higher at 86.80 pence , having earlier fallen to a two-month low on lingering concerns that the euro zone's debt problems may engulf two of its larger economies Italy and Spain.

Traders cited decent resistance at 87.50 pence, the high struck on Aug. 8, while on the downside analysts said a close below its 200-day moving average of 86.644 pence would open up the potential for a fall to 85.90 pence the low struck on March 11.

"The headline US jobs numbers have provided a bit of encouragement to the likes of euro and Cable with investors cutting some of their long dollar positions," said Michael Derks, chief strategist at FXPRO.

"But the labour market in the US remains fragile and given the euro's debt problems, Cable looks like holding on."

US data showed non-farm payrolls accelerated more than expected last month and the unemployment rate dipped to 9.1 percent from 9.2 percent in June.

Sterling was up 0.5 percent on the day at $1.6352, regaining its footing after falling 1.0 percent the previous day when the dollar rallied broadly on the back of intervention by Japanese authorities to sell the yen.

The pound showed little reaction to data showing a big rise in UK wholesale prices. The figures did nothing to change the view that the Bank of England may hold off from raising interest rates until well into 2012 at the earliest. Some analysts even expect the BOE to ease monetary policy further by resorting to more quantitative easing.

Analysts said sterling's gains could run out of steam next week if the BoE cuts its growth forecast in its quarterly inflation report.

"Weaker growth ahead while inflation remains uncomfortably high this year could make the ambitious government fiscal austerity plan look difficult to achieve," CitiFX analyst Valentin Marinov said in a note.

"In addition, abating inflation pressures against the background of slowing global growth could maintain speculation for more BoE accommodation ahead."

The euro pared some its early losses versus sterling, edging up on a slight improvement in risk appetite after the U.S jobs numbers and as traders said the European Central Bank was buying Irish and Portuguese bonds to stem a rise in their yields.

But analysts expect the deepening euro zone debt crisis will push the euro lower again against the pound.

Copyright Reuters, 2011