* Dollar weakens further after weaker jobs data
* Euro undeterred by Jan flash PMI numbers
* Sterling sets its eyes on $1.40, near 3-yr high
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Tommy Wilkes
LONDON, Feb 19 (Reuters) – The U.S. dollar slipped furtheron Friday and the euro rebounded after disappointing U.S. datadented optimism for a speedy recovery from the COVID-19pandemic, while sterling edged towards the $1.40 mark.
The U.S. currency had been rising as a jump in Treasuryyields on the back of the so-called reflation trade encouragedinvestors back into the greenback.
But an unexpected increase in U.S. weekly jobless claimssoured the economic outlook and sent the dollar lower overnight.
On Friday it traded down 0.1% against a basket ofcurrencies, the dollar index now at 90.474.
The string of soft labour data is weighing on the dollareven as other indicators have shown resilience, and as PresidentJoe Biden’s pandemic relief efforts take shape, including aproposed $1.9 trillion spending package.
The euro rose 0.2% to $1.2113. The single currencyshowed little reaction to German and French flash purchasingmanager index data, which unsurprisingly showed a slowdown inactivity in January.
Despite the recent rise in U.S. yields, many analysts thinkthey won’t climb too much higher, limiting the benefit for thedollar.
ING analysts said that “the rise in rates will beself-regulating, meaning the dollar need not correct too muchhigher.”
They see the greenback index trading down to the 90.10 to91.05 range
Sterling has been the standout performer in 2021 and onFriday rose to $1.3987, an almost three-year high amid Britain’saggressive vaccination programme.
Given the size of Britain’s vital services sector, analystssay the faster it can reopen the economy the better for thecurrency.
The dollar bought 105.46 yen, down 0.2% and acontinued retreat from the five-month high of 106.225 reachedWednesday.
Many analysts expect the dollar to weaken over the course ofthe year as it has traditionally done during times of globaleconomic recovery, though it might take some time to develop.
“It looks to me like there’s some exhaustion in thatjust-straight global reflation theme,” leading the dollar totrend largely sideways for now, said Daniel Been, head of FX atANZ in Sydney.
(Additional reporting by Kevin Buckland in Tokyo; Editing byHugh Lawson)