By Lucy Raitano and Gertrude Chavez-Dreyfuss LONDON/NEW YORK (Reuters) -The dollar weakened on Friday, poised for multi-week losses against major currencies, as uncertainty surrounding a potential U.S. government shutdown clouded the outlook and delayed key data releases — such as payrolls — critical for gauging the economy's direction. The U.S. nonfarm payrolls report for September was due for release on Friday, but was not published due to the government closure. The yen, on the other hand, pulled back from this week's highs as traders mulled the Bank of Japan's next move ahead of a ruling party leadership election this weekend. In late morning trading, the euro rose 0.2% against the dollar to $1.1739, headed for its best week in a month. Gains in the euro pushed the dollar index, which measures the greenback against a basket of key currencies, 0.1% lower at 97.77. The index was on track for its worst weekly showing since July. "The shutdown is basically extending concerns about the health of the U.S. economy. We're almost flying blindly here, and we don't know," said Jayati Bharadwaj, global FX strategist at TD Securities in New York. "The longer the shutdown extends, people will start to get concerned about its impact on the economy. Already, there are concerns about people being let go, being furloughed, which is what the government has historically done, and all of that is just weighing on the dollar in the short term." Against the Swiss franc, the dollar fell 0.3% to 0.7953 francs. It was down 0.4% on the week, on pace for its worst weekly showing since mid-August. The dollar also slid against sterling, which rose 0.2% to $1.3470. The pound was on track for its largest weekly gain since August 11. The U.S. currency slightly extended its fall against major currencies after data showed U.S. services sector activity stalled in September amid a sharp slowdown in new orders. The ISM said its non-manufacturing purchasing managers' index (PMI) fell to 50 last month, the breakeven level, from 52.0 in August. Economists polled by Reuters had forecast the services PMI easing to 51.7. The services sector accounts for more than two-thirds of U.S. economic activity. In other FX pairs, the dollar edged higher against the yen, up 0.1% at 147.44 yen having earlier fallen as much as 0.4%. It remained on track for a 1.4% advance this week that would be the biggest since mid-May. BOJ Governor Kazuo Ueda struck a cautious tone in comments about the global economy, lowering expectations of an imminent rate hike. Markets were also focused on a Liberal Democratic Party election on Saturday that will determine Japan's next prime minister. "Market participants are a little bit disappointed potentially. … He (Ueda) didn't really lean into the idea of an October rate hike as much as some of his colleagues have done in recent sessions, that's why we've seen a little bit of pressure on the yen," said Michael Brown, senior research strategist at Pepperstone. Markets were keeping a close eye on speeches by BOJ officials this week after the central bank's Tankan survey on Wednesday showed confidence among big manufacturers improved for the second straight quarter. TWO MORE FED RATE CUTS EXPECTED THIS YEAR In the U.S. overnight, a Chicago Fed report that combined private and available public data estimated the September jobless rate was 4.3%, the same as in August and evidence that a feared rapid rise in unemployment had not yet begun. But details of the report, along with other data, pointed to sluggishness in the labour market. The ADP National Employment report on Wednesday showed private payrolls decreased by 32,000 in September, boosting expectations that the Federal Reserve would cut interest rates twice more this year. Traders see a 25-basis-point cut at the Fed's October meeting as almost certain and are pricing in an 84% probability of an additional cut in December, according to the CME Group’s FedWatch Tool. Dallas Fed President Lorie Logan on Thursday said the central bank appropriately cut rates last month to guard against the risk of a sharp deterioration in the job market, but said that so far the cooling has been gradual and signalled she was not eager to cut rates further. Currency bid prices at 1515 GMT on October 3 Descripti RIC Last U.S. Pct YTD Pct High Low on Close Change Bid Bid Previous Session Dollar 97.721 97.823 -0.09% -9.93% 97.949 97.6 index 01 Euro/Doll 1.1739 1.1715 0.21% 13.39% $1.176 $1.1 ar 716 Dollar/Ye 147.44 147.22 0.14% -6.31% 147.825 147. n 145 Euro/Yen 173.11 172.5 0.35% 6.06% 173.24 172. 44 Dollar/Sw 0.7953 0.7979 -0.32% -12.36% 0.798 0.79 iss 5 Sterling/ 1.3468 1.3439 0.23% 7.7% $1.3476 $1.3 Dollar 43 Dollar/Ca 1.3953 1.3966 -0.08% -2.96% 1.3969 1.39 nadian 48 Aussie/Do 0.66 0.6597 0.07% 6.69% $0.661 $0.6 llar 59 Euro/Swis 0.9336 0.9345 -0.1% -0.61% 0.9358 0.93 s 36 Euro/Ster 0.8716 0.8713 0.03% 5.35% 0.8729 0.87 ling 12 NZ 0.5826 0.5818 0.17% 4.15% $0.5836 0.58 Dollar/Do 14 llar Dollar/No 9.9404 9.9592 -0.19% -12.54% 9.9944 9.92 rway 42 Euro/Norw 11.6706 11.6842 -0.12% -0.84% 11.716 11.6 ay 6 Dollar/Sw 9.3661 9.3945 -0.3% -14.99% 9.4142 9.35 eden 09 Euro/Swed 10.9952 11.0105 -0.14% -4.11% 11.0325 10.9 en 92 (Reporting by Lucy Raitano in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Rocky Swift in Tokyo; Editing by Shri Navaratnam, Toby Chopra, Alex Richardson, Peter Graff)
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