FOREX-Dollar retreats on disappointing U.S. jobs data

Reuters

* U.S. payrolls grew at slowest pace in 8 months

* Dollar retreats from nearly six-year high versus yen

* News of ceasefire in Ukraine stems dollar's fall

* Euro on track for worst losing streak since launch (Updates market action, changes dateline from LONDON)

By Richard Leong

NEW YORK, Sept 5 (Reuters) - The dollar fell on Friday after data showed U.S. employers added the fewest jobs in eight months, eroding some confidence in the domestic economy and reviving bets that the Federal Reserve might leave interest rates near zero for longer than anticipated.

The U.S. Labor Department said non-farm payrolls grew by 142,000 last month, far below the 225,000 increase among analysts polled by Reuters.

The greenback scaled back from a nearly six-year high against the yen set in earlier trading.

The euro recovered from a 14-month low against the dollar the day after a surprise interest rate cut from the European Central Bank to help an anemic euro zone economy. The common currency was still on track for its eighth week of losses against the dollar, the longest such streak ever since it was introduced in January 1999.

"This payrolls report gives the currency market a reason to embark on a mild correction on the dollar," said Mark McCormick, currency strategist at Credit Agricole in New York.

The dollar's decline was mitigated by news of a ceasefire deal between Ukraine and pro-Russian separatists. The fighting between the two sides had stoked safe-haven bids for the Japanese yen and Swiss franc.

While the August reading on U.S. hiring fell far short of the median forecast, an increase in hourly earnings and a measure on long-term joblessness were more promising.

That data, along with this week's robust figures on domestic manufacturing and car sales, supported the view that the world's biggest economy was expanding at a steady clip. This should keep the U.S. central bank on course to raise the policy rate from near zero into mid-2015, analysts said.

"The market will likely begin to discount this jobs report as we head into the next Fed meeting," McCormick said.

The Federal Open Market Committee, the Fed's policy-setting group, will meet Sept. 16-17.

The dollar on the EBS trading system last traded down 0.37 percent at 104.87 yen after it touched a nearly six-year high of 105.71 yen in Asian trading. The greenback was on track to rise against the yen for the fourth straight week, the longest stretch so far this year.

The euro edged up 0.2 percent against the dollar at $1.2974 after shedding 1.6 percent on Thursday, its steepest fall in almost three years, to a 14-month low of $1.2920 after the ECB cut rates to record lows and launched a bond purchase program to avert deflation.

The rebound in the euro and yen pushed the dollar index below a 14-month high of 83.943 struck earlier on Friday. It was last at 83.592, down 0.26 percent on the day but up 1.02 percent on the week.

(Additional reporting by Jemima Kelly in London, Masayuki Kitano in Singapore and Ian Chua in Sydney; Editing by Toby Chopra and Lisa Von Ahn)

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