European focus: USD stabilized ahead Payrolls [E]

The USD little changed before June U.S. payrolls on Friday. These data may show employment growth doubled compared with prior month. It will strengthen the probability of further Fed interest rates hike. The U.S. currency is poised for a weekly gain against the euro and yen on speculation faster growth will prompt the Fed to lift interest rates for an 18th straight time from current level 5.25%. FOMC lifted interest rate to a 5-years high on June 29 and declared the further steps of the central bank will depend on incoming statistics data. Fed Board Vice Chairman Donald Kohn said U.S. central bankers worry about the risk of raising rates too far, while they agreed on last week's increase for credit rate.

According to analysts, Labor Department can report today U.S. employers added 175,000 workers compared with +75,000 in May. On July 5 the dollar climbed a 2-week high versus the euro after a private report estimated U.S. companies added 368,000 jobs, the most since 2001. The report, by Automated Data Processing Inc. and Macroeconomic Advisers LLC, prompted economists to increase forecasts for Payrolls. ADP says there is a 90% correlation between its data and the government's private employment figures.

Meanwhile, economists rose its forecasts for ECB rate after the positive speech of bank President Jean-Claude Trichet at press conference on Thursday. Trichet said about the vigilance concerning inflation process and hinted on acceleration of interest rates hike in region. ECB left the rate unchanged at 2.75%. Next ECB meeting will be on August 3.

The yen can proceed yesterday growth on speculations NBC has an urgent session to make a decision on yuan’s fluctuations board increase. Today China’s currency has appreciated the most since its revaluation on July 21, 2005, continuing the 6-week rally. The strong yuan can reduce the cost of China’s import, the largest partner of Japan. The yen became stronger on 2.3% since July, 21st, 2005. However, fears about potential threat of Japan’s safety from North Korea influence negative on yen. Yesterday North Korea’s authority have made a decision on continuation of tests after 7 missiles fell to Japan Sea on July 5. That day the yen declined to a historical low against the euro.