Dollar nurses quarterly losses as U.S. jobs data awaited

By Lisa Twaronite

TOKYO (Reuters) - The dollar licked its wounds on Friday after taking steep quarterly losses against major rivals, as investors awaited the nonfarm payrolls report for the latest reading on U.S. labor conditions and potential clues to the monetary policy outlook.

The dollar index, which tracks the greenback against a basket of six rival currencies, edged down slightly to 94.565 (DXY), after shedding more than 4 percent in the first quarter for its worst performance since the third quarter of 2010. It notched a five-month low of 94.319 in the previous session.

On Tuesday, Fed Chair Janet Yellen highlighted risks to the global economy in a speech, and said the Fed should proceed "cautiously" on raising interest rates, quashing the hopes of those who expected a hike sooner rather than later.

Lower U.S. yields undermined the dollar, as Treasuries marked their best quarter in 4-1/2 years.

The nonfarm payrolls report is expected to show that employers added 205,000 jobs in March.

"We believe that dollar bulls will be sorely disappointed by tomorrow's report for a numbers of reasons," Kathy Lien, managing director at BK Asset Management in New York, said in a note to clients.

"Non-farm payrolls is only important when it can be a game changer for Federal Reserve policy but Janet Yellen made it very clear that they have no intention of raising interest rates in April and unless there's significant improvements at home and abroad, rates will remain steady in June as well," Lien said.

After Yellen's speech, interest rates futures implied a majority of traders saw only a 5 percent chance of a rate increase at the Fed's next policy meeting on April 26-27.

Against the yen, the dollar slipped about 0.2 percent to 112.38 after skidding more than 6 percent in the first quarter, its biggest loss since the third quarter of 2009, as market turmoil sent investors into the perceived safety of the Japanese currency.

The Bank of Japan's quarterly tankan survey of business confidence, published earlier on Friday, showed large manufacturers' business sentiment deteriorated to its lowest level in nearly three years and was expected to worsen in the coming quarter.

Large manufacturers expect the dollar to average 117.46 yen in the fiscal year which began on Friday, the survey showed.

The euro edged up about 0.1 percent to $1.1386 , after gaining more than 4 percent for the quarter and hitting a more than 5-month high of $1.4120 on Thursday.