Kiran

The dollar held near one-month highs against the euro and yen on Thursday after getting a boost the previous day as a report showing unexpected employment gains provided more hope the US economy is not deteriorating further.

The dollar's gains were kept in check as oil prices snapped a losing streak, which has bolstered the US currency on hopes that the 10 percent slide in crude prices this month would take some of the pressure off the struggling economy.

Many investors stuck to the sidelines before a slew of US economic data over the next few days, including the monthly payrolls report on Friday, that will test expectations the Federal Reserve may lift interest rates later in the year. The dollar's fortunes have started to turn up as the euro zone, Japan, Australia and many other countries are showing clear signs of losing steam nearly a year after the credit crunch first erupted.

Data on Thursday showed Australian retail sales suffering the biggest drop in six years in June. "The dollar is the winner in what's becoming an ugly contest," said Masafumi Yamamoto, head of forex strategy for Japan at Royal Bank of Scotland.

"I'm not bullish on the dollar, the market still expects too much tightening by year-end. But it may gain and will not fall substantially," Yamamoto said. The dollar dipped 0.1 percent from late U.S. trade at 107.99 yen, holding near a one-month peak of 108.34 yen struck the previous day. The single European currency slipped 0.1 percent to 168.23 yen but was near a record peak just below 170 yen.

The euro was flat at $1.5578 after having dropped as far as $1.5522 on trading platform EBS on Wednesday, a one-month low. The ADP employment report, a private sector gauge of labour market trends, showed a surprising 9,000 increase in jobs in July, much better than the expected 60,000 drop.

But analysts warned that the ADP figures have a spotty record in predicting how the outcome of the government jobs report, which has showed companies cutting workers every month this year. The payrolls report is viewed as key because Fed officials have indicated their discomfort with the pick-up in inflation pressures, but persistent job losses make it difficult for the Fed to consider lifting rates from 2 percent.

Thursday's reports will feature the US economy's overall performance for the second quarter, as well as the Chicago PMI reading on Midwest business activity. The expansion of emergency lending facilities by the Fed, ECB and Swiss National Bank also briefly helped the dollar, showing that top central banks are making every effort to keep money flowing through strained money markets and prevent a renewed downturn.