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Soft US jobs data pin down dollar, euro hostage to Greek vote

[LONDON] The dollar fell against a basket of currencies on Friday, hurt by softer-than-expected US employment data amid thin volumes with most investors staying on the sidelines before Greece's weekend referendum on bailout conditions.

Volumes eased in the afternoon session in Europe with US markets closed for Independence Day. Caution reigned, with investors trimming positions in riskier assets and currencies before the Greek vote on Sunday on an international bailout deal that could determine whether the country stays in the eurozone.

The dollar index was down 0.1 per cent at 96.001, retreating from a four-week high of 96.422 hit earlier in the day. The greenback was buying 122.65 yen, 0.3 per cent lower on the day.

The euro shed 0.2 per cent against the safe-haven yen but edged up 0.1 per cent to $1.1100.

"With liquidity thin and the Greek referendum coming up, not many would want to take large positions going into the weekend. The US jobs report has taken the wind out of the sails for the dollar for the time being," said Alvin Tan, currency strategist at Societe Generale.

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The US payrolls report showed employers hired 223,000 workers last month, fewer than the 230,000 increase forecast in a Reuters poll. The government also downgraded its reading on April and May job growth, while wage growth remained subdued.

Investors had been hoping that solid improvement in the labour market would reinforce expectations that the Federal Reserve will raise interest rates as early as September. Still, the report was not gloomy enough to quash expectations that the Fed would tighten later this year.

All in all, major currencies were hugging familiar ranges, with the euro supported by a poll that showed supporters of Greece's bailout terms taking a wafer-thin lead over the "No" vote backed by the leftist government.

Another poll by the Avgi newspaper, though, showed the 'No'camp were just in front.

"For the euro, a 'Yes' vote could lead to a bounce, but we would still prefer to sell it on rallies," added Societe Generale's Tan.

The International Monetary Fund warned on Thursday that Greece would need an extension of its European Union loans and a potentially large debt writeoff if it cannot implement economic reforms and its growth slows.

Analysts said negotiations after a "Yes" vote are likely to be prickly, and would keep gains in the euro limited.

Meanwhile, the Australian dollar fell to a 6-year low, hurt by disappointing domestic retail sales data and a continued sell-off in the Shanghai stock market. China is Australia's biggest trading partner and the Aussie is used as a proxy.

The Aussie fell to $0.7509, down 1.6 per cent on the day, and its lowest level since mid-2009. "We expect the Aussie to trend lower towards $0.72 medium-term," said Jane Foley, senior currency strategist at Rabobank.


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