* U.S. payrolls show unexpected drop in September
* Dollar falls below 82 yen to 15-year low
* Fed's Bullard earlier says more easing not obvious case (Updates prices, adds quote, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 8 (Reuters) - The dollar slumped to 15-year low against the yen on Friday after data showed an unexpected drop in U.S. payrolls in September, bolstering expectations of further easing by the Federal Reserve to revive a sputtering economy.
That should ensure the dollar's weak trend remains intact, with the Fed's quantitative easing involving asset purchases meant to push long-term yields lower. Traders are now focusing on the 80-yen level for the dollar after it fell to a low of 81.72 yen on electronic trading platform EBS following the employment report, which showed 95,000 job cuts last month. For the non-farm payrolls report, click on [ID:nN08205203]
The dollar also fell sharply against the euro on the jobs data, but it later recovered after Eurogroup Chairman Jean-Claude Juncker said he was not happy with the euro's move to $1.4000, a level surpassed on Thursday. The euro is headed for its fourth consecutive week of gains.
"The impact of the report was negative for the dollar, as it increased the likelihood of further QE (quantitative easing) measures later this year," said Michael Woolfolk, senior currency strategist at BNY Mellon, in New York.
"The U.S. is struggling to bring its unemployment rate down as heightened uncertainty and a lack of credit growth undermine business sentiment and discourage new hiring."
In early afternoon trading, the dollar was last at 82.00
yen
"There was no sign of the Bank of Japan in the market yet, but there's strong support below the 82 yen level and I wouldn't be surprised to see it bounce if it dips below 82 again today," said Greg Salvaggio, vice president for trading at Tempus Consulting in Washington.
Japanese Prime Minister Naoto Kan said Japan would take decisive steps on the strong yen if needed, but added that it also wanted to cooperate with the G7 and other countries. [ID:nTOE69700W]
EURO FALL
Investors are also wary in case the G7 and IMF meetings starting in Washington on Friday produce a surprise in the form of a coordinated front on currencies, as calls have mounted for global efforts to avoid competitive currency devaluations.
The euro was last down 0.1 percent against the dollar at
$1.3910
The euro exchange rate against the dollar is too strong at $1.40, as the dollar does not reflect the economic fundamentals of the United States, Juncker said on Friday ahead of the meeting of finance ministers and central bankers of the Group of Seven most industrialized countries.
"Juncker's comments were the clearest indication yet that euro zone officials are growing uncomfortable with the single currency's export-sapping strength," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington.
"The greenback stands to benefit further if euro zone monetary officials begin to take a more vocal stance against euro appreciation."
Also on Friday, St. Louis Fed chief James Bullard, a voting member this year on the Fed's rate-setting committee, told CNBC policymakers face a tough decision at next month's policy meeting as the economy has slowed but is still bumping along. [ID:nN08192815]
Market speculation has increased that the Fed will resume quantitative easing when it meets on Nov. 2-3 to shore up the economy. Bullard did not rule this out, saying more help may be needed to push up inflation.
The dollar index, a non-traded calculation of the dollar's
performance against a basket of six other major currencies, was
flat at 77.344 <.DXY>, though above an 8-1/2-month low of
76.906 touched on Thursday. It has support at 76.60, the index
low for 2010 hit in mid-January.
(Additional reporting by Nick Olivari and Vivianne Rodrigues;
Editing by Dan Grebler)