FOREX-Dollar off to pedestrian start in August after stellar July

Reuters

* Dollar nurses losses after jobs data disappoints bulls

* Euro squeezes higher, but wary as ECB policy meeting looms

* Aussie dollar eyes RBA policy review for near-term impetus (Adds details, prices)

By Ian Chua and Shinichi Saoshiro

SYDNEY/TOKYO, Aug 4 (Reuters) - The U.S. dollar got off to a quiet start on Monday, having suffered its biggest one-day fall in nearly a month after a batch of economic data led markets to temper expectations for the start of the Federal Reserve's rate-tightening cycle.

Data released on Friday showed U.S. jobs growth slowed in July, the unemployment rate unexpectedly edged up and inflation was restrained, a mix of figures that should give the Fed room to keep interest rates low for a while yet.

"The July jobs data won't change the Fed's benign stance as it was about as 'goldilocks' as it could be," said Shane Oliver, Head of Investment Strategy at AMP Capital in Sydney.

The dollar index was last at 81.354, having retreated from a 10-1/2 month peak of 81.573. It had fallen 0.2 percent on Friday, a modest decline by any measure but still the biggest one-day fall in over three weeks.

The index had rallied more than 2 percent in July, a feat not seen in over a year, as improving U.S. data convinced markets that an interest rate rise could be less than 12 months away.

So any disappointment in the jobs figures was always going to prompt a bit of profit taking, traders said.

That allowed the euro to push back above $1.3400 and off an eight-month trough of $1.3366 plumbed last week. The common currency last traded at $1.3418, little changed on the day.

Against the yen, the greenback recoiled to 102.62, having stretched to a near four-month high of 103.15.

Despite the sharp pullback by dollar/yen in wake of the non-farm payrolls, participants saw glimpses of a longer-term trend forming that favoured the greenback.

Koji Fukaya, president at FPG Securities in Tokyo, said dollar/yen popping above the 103 yen threshold several times last week spelled a departure from the past six months, when the pair was stuck in a narrow band around 102.

"There is also a trend change in dollar/yen implied volatility. Vols have been dropping since the start of the year, but the downtrend was broken in July and one-year implied vols briefly rose above 8 percent last week. This could help initiate moves in the cash market," he said.

One-year dollar/yen implied volatility, or the expected price swing, fell to a seven-year low of 6.90 percent in mid-July but rose above 8 percent on Friday, highlighting expectations that the pair is likely to see a new trading range in coming weeks.

The safe-haven yen also gained ground against the Australian and New Zealand dollars, partly supported by safety flows as worries about Argentina's debt default and tensions between Russia and the West sent European and U.S. shares lower.

Not likely to help risk appetite, data on Sunday showed growth in China's services sector slipped to a six-month low in July as new orders rose by their weakest rate in at least a year.

Broad softness in the greenback saw the Aussie dollar pop back above 93 U.S. cents, from two-month lows of $0.9275.

After the currency showed limited reaction to a slightly stronger-than-expected Australian retail sales figures, Aussie bulls will be looking to an interest rate meeting by the Reserve Bank of Australia (RBA) on Tuesday.

The European Central Bank, Bank of Japan and Bank of England (BOE) will also feature this week, but as with the RBA, no policy action is expected from any of them.

(Editing by Shri Navaratnam & Kim Coghill)

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