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FOREX-Euro near 9-year low, dollar firm ahead of US jobs data

* Euro pressure by mounting expectations of ECB easing

* Investors expect solid U.S. job gains

* Larger rise in U.S. wages could fan Fed rate hike

By Hideyuki Sano

TOKYO, Jan 9 (Reuters) – The euro wallowed near a nine-year low on Friday on growing expectations the European Central Bank will embark on quantitative easing, while the dollar held firm before U.S. jobs data that could cement the case for a rate hike by the Federal Reserve.

ECB President Mario Draghi said the bank’s Governing Council stands ready to take unconventional measures if needed to stem a prolonged period of low inflation.

The euro stood at $ 1.1792, having hit a nine-year low $ 1.1754 on Thursday as traders grew more convinced that the ECB might start buying euro zone sovereign debt as soon as this month.

“We note that (Wednesday’s) daily close below the 2010 low at $ 1.1877 has amplified bearish sentiment, with the resulting breakout targeting the 2005 low at $ 1.1640 as the next major support target,” said George Davis, chief technical analyst at RBC Dominion Securities in Toronto in a note to client.

Soft euro zone economic data this week also fanned expectations of early ECB action.

German industrial orders suffered an unexpected slump in November, data showed on Thursday, a day after price data confirmed the euro zone slipped into deflation.

In addition, concern that a Jan. 25 Greek general election would lead to a stand-off between Berlin and Athens over austerity policies imposed on Greece provided another reason for investors to steer clear of the euro.

On the other hand, the dollar was broadly firm as investors look for a solid increase in U.S. employment, with the dollar index, now at 92.307, coming within sight of its 2005 peak of 92.630.

Against the yen, the dollar stood at 119.79 yen, extending its recovery from a low of 118.05 hit on Tuesday.

Investors expect the U.S. payrolls data due later on Friday to post a solid increase of 240,000 in December, after surprisingly strong gains of 321,000 in November.

Despite recent improvements in the job market, the Fed has said it will be patient in raising rates as inflation is expected to be subdued.

Boston Fed President Eric Rosengren, speaking on Thursday, highlighted the Fed’s cautious stance, saying the Fed can likely be patient not only on the timing of the first interest rate hike but on the series of subsequent hikes.

Still any signs of a pick-up in wage increases could heighten speculation of earlier action, with some analysts noting the importance of average hourly earning data that comes with the jobs report.

Earnings rose 0.4 percent in November, the strongest in almost a year and a half. Another rise of 0.3 to 0.4 percent could change the perception, likely damaging many emerging market currencies, said Steven Englander, global head of G10 foreign exchange strategy at CitiFX.

“The biggest jolt to the market would be to see a second month of AHE gains… we have not had an 0.7 percent gain over a two-month period since 2008, so it would count as a breakout,” he said.

Sterling stayed near an 18-month low on Thursday, as it suffered from a mix of broad dollar strength, weaker UK growth prospects and political uncertainty.

As expected, the Bank of England kept its benchmark interest rate at its all-time low of 0.5 percent, where it has remained since 2009. The BoE is now expected to keep it there until next year – a stark change from six months ago, when many were betting on a rise before the end of 2014 (Editing by Shri Navaratnam)

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