LONDON, Sept 7 (AFP) - The dollar lost ground against the euro in late-day trade here Tuesday, with investors awaiting Congressional testimony Wednesday from US Federal Reserve Chairman Alan Greenspan for clues on the future course of US monetary policy.
The single European currency was trading at 1.2093 dollars after 1.2065 late Monday in New York.
Against the yen the dollar was at 109.34 against 110.23 on Monday.
Wednesday's testimony by Greenspan to the House Budget Committee will be closely watched by market participants as they seek to know his reading of US economic prospects following last week's relatively strong jobs data.
The creation of 144,000 jobs in August relieved market concerns that the US economic recovery was petering out.
In the process, the payrolls data cemented expectations the Fed will raise the cost of borrowing by another quarter point when it meets on September 21, taking the key Fed funds futures rate up to 1.75 percent.
"The payrolls data has helped underpin the dollar as the market thinks the Fed will stick with its policy of measured interest rate increases," said Neil Mackinnon, chief economist at ECU Group.
In August, policymakers on the Federal Open Market Committee hiked the federal funds rate, which banks charge each other for overnight loans, to 1.50 pct from 1.25 percent.
Another quarter point hike is expected on September 21, Mackinnon said.
For the dollar to slide back, he said Greenspan would have to suggest that there was a question mark hanging over the sustainability of the US recovery.
"That is very unlikely," he added.
Wednesday's report from US employment analyst Challenger into layoffs in the US meanwhile shored up expectations of a steady pick-up on the US jobs front.
While Challenger said the rate of layoff announcements picked up in August, with 74,150 job cuts announced against 69,572 in July, it remains relatively stable at near the lowest levels of the recovery.
"Total layoff announcements thus far in 2004 remain substantially below year-ago levels and this year marks the smallest number of planned job cuts for the first eight months of a year since 2000," said Bear Stearns analyst John Ryding.
Meanwhile the yen was supported by expectations the Japanese government would revise upwards the June quarter growth figures following a positive finance ministry survey on capital corporate spending and profits
The world's second-largest economy grew 0.4 percent in the three months to June from the previous three-month period, pressured by weak consumption and corporate investment, official data showed last month.
On the other hand sterling was softer after weak manufacturing and consumption data fuelled talk that British interest rates may have peaked.
"There's been a slew of economic data suggesting that interest rates are at, or near, their peak and speculative players are unwinding positions," said ECU Group's Mackinnon.
The euro was changing hands at 1.2093 dollars against 1.2065 late on Monday in New York, 132.23 yen (133.03), 0.6823 pounds (0.6785) and 1.5353 Swiss francs (1.5337).
The dollar stood at 109.34 yen (110.23) and 1.2696 Swiss francs (1.2704).
The pound was at 1.7725 dollars (1.7796), 193.87 yen (196.01) and 2.2508 Swiss francs (2.2603).
On the London Bullion Market, the price of an ounce of gold stood at 398.10 dollars compared with 401.60 dollars late on Monday.