FOREX-Dollar struggles ahead of job figures as investors fret over U.S. recovery

* Dollar broadly weak as recovery seen hampered by virus
* Euro near 2-year peak vs dollar, 16-month high vs yen
* Investors look to upcoming jobs data
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Updates prices)
By Hideyuki Sano and Eimi Yamamitsu
TOKYO, Aug 6 (Reuters) - The dollar struggled on Thursday
under the weight of worries the U.S. economic recovery may lag
other countries due to a high level of coronavirus infections,
as investors looked to upcoming data on the U.S. labour market.
The dollar's index against a basket of currencies =USD
stood almost flat at 92.814, having fallen more than 0.5% in the
previous session to approach its two-year low of 92.539 marked
last Friday.
"Dollar-selling seems to have resumed. We are having the
same structure we saw in July," said Shinichiro Kadota, senior
strategist at Barclays.
A decline in the U.S. currency has gathered pace since late
July on rising perception that the U.S. economic recovery could
be hobbled by the country's poor performance in containing the
COVID-19 outbreak.
The euro changed hands at $1.1869 EUR= , having gained 0.5%
in the previous day's trade to stand just below Friday's
two-year high of $1.1908, extending its bull run since European
leaders agreed on a recovery fund on July 21.
The common currency held an upper hand against the yen,
trading at 125.25 yen EURJPY=R , having hit its highest since
April last year in the previous session.
The U.S. currency slipped a tad to 105.52 yen JPY= .
The dollar extended losses in the previous session after
data showed U.S. private payrolls growth slowed sharply in July,
suggesting the labour market recovery was faltering.
A separate survey by the Institute for Supply Management
(ISM) also showed U.S. services industry activity gained
momentum in July as new orders jumped to a record high but here
too, hiring declined, stoking worries about upcoming job
figures. Weekly data due at 1230 GMT is expected to show a slight
decline in initial claims to 1.415 million last week from 1.434
million in the preceding week.
On Friday government data is expected to show payroll growth
slowing to 1.6 million in July from 4.8 million in June.
With more than 30 million people on jobless benefit,
recovery in employment is seen as critical to the U.S. economy,
with many investors counting on another fiscal stimulus to
support the economy.
Top congressional Democrats and White House officials
appeared to harden their stances on new coronavirus relief
legislation, however, as negotiations headed toward an
end-of-week deadline with no sign of an agreement. "I expect a deal will be reached before the Congress will
adjourn on Aug. 10. So far there are few signs of compromise,
leaving markets unable to react," said Masafumi Yamamoto, chief
currency strategist at Mizuho Securities.
If the two sides reach a middle ground, the dollar could
rebound, he added.
Sterling also edged near Friday's 4-1/2-month high of
$1.3170, last quoted at $1.3129 GBP=D4 .
The Bank of England looks set to hold off from taking
further action at its policy review later in the day, by keeping
its benchmark interest rate at an all-time low of 0.1% and its
bond-buying stimulus programme unchanged at 745 billion pounds
($980 billion).
The U.S. dollar sank to its lowest in almost half a year
against the Canadian dollar at C$1.3273 CAD=D4 .
The offshore Chinese yuan traded at 6.9439 per dollar
CNH= , near its five-month high of 6.9324 on Wednesday.
Hedging demand against a softening dollar kept gold
elevated, with spot gold last trading at $2,041.5 per ounce
XAU= , near Wednesday's record high of $2,055.3.
Plummeting U.S. bond yields, especially in
inflation-adjusted terms, are undermining the attraction of the
dollar, which had boasted highest yields among major currencies
before the pandemic.
"It's difficult to buy the dollar with such a decline (in
U.S. rates), and it's understandable how gold is being bought to
substitute for the dollar," said Yukio Ishizuki, senior
strategist at Daiwa Securities.

(Editing by Lincoln Feast and Jacqueline Wong)