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Bets against the U.S. dollar have grown significantly since September because of increased expectations the Federal Reserve will print money to buy debt, and that may limit the downside if the payrolls number is a lot lower than expected.

Still, if the Fed follows suit with the Bank of Japan and gets more aggressive about easing policy than the market anticipates, the cheap money trade of selling dollars and buying gold, emerging market equities and longer-term bonds will undoubtedly spread.

Japan's Nikkei share average slipped 0.5 percent .N225 after hitting a two-month intraday high on Thursday.

The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS edged 0.4 percent lower after closing at a 28-month high on Thursday. Declines were spread evenly across most sectors, though the technology sector underperformed for a second day.

In the foreign exchange market, the euro, which has benefited from dollar weakness, was largely unchanged at $1.3917 after the currency reached an eight-month high around $1.4030 on Thursday.

The rapid increase of bets on the euro means the threshold for more dollar weakness after the U.S. payrolls figure is high.

"Positioning could limit the degree of dollar downside, particularly against the euro. This likely means that the bar for a dollar-positive surprise on the upside is somewhat lower and a just above consensus outcome may not be a significant spark for volatility," Todd Elmer, currency strategist with Citi in Singapore, said in a note.

The dollar was trading at 82.35 yen, above a 15-year low of 82.11 yen plumbed on Thursday.

The outcome of the Group of Seven rich nations meeting this weekend could influence views on when Japanese officials will intervene again to pull down the yen.

Japan's first intervention in six years last month sparked a heated debate globally -- what some have even called a currency war -- about what governments can do to keep their currencies from strengthening against the falling dollar.

"There's speculation that, if the G7 wants a coordinated stance to put pressure on China to raise the yuan, then it becomes more difficult for Japan to intervene," said a dealer at a Japanese brokerage house.

Gold prices slipped in the spot market, falling 0.2 percent to $1,330.30 an ounce. The precious metal traded in a wide range on Thursday, hitting an all-time high of $1,364.60 but then ending the session around $1.332.70.

The 90-day inverse correlation between gold and the U.S. dollar is the strongest it has been all year, meaning when one falls, the other is very much likely to rise based on price action over the past three months.

(Additional reporting by Hideyuki Sano in Tokyo)

The Group of 20 finance ministers scheduled a working breakfast on the sidelines of this weekend's International Monetary Fund and World Bank twice-yearly meetings.

The smaller G7 grouping of advanced economies holds a closed-door dinner later on Friday.

Neither group is expected to issue a formal statement, but G20 officials said foreign exchange matters will be discussed at both events amid concerns that countries will intentionally weaken their currencies to pursue export-led growth.

China, usually at the center of the currency debate, has company this time. Officials are still leaning on Beijing to allow the yuan to rise more rapidly, but Japan's intervention last month to weaken the yen put Tokyo on the hot seat, too.

The United States can also expect criticism over its seemingly benign neglect of the sinking dollar, which has led investors to chase bigger returns in emerging markets such as Brazil, driving up asset prices and inflation.

"What we all want is a rebalancing of the global economy and this rebalancing cannot happen without ... a change in the related value of currencies," IMF Managing Director Dominque Strauss-Kahn said on Thursday.

The currency strains are symptomatic of a deeper problem: most advanced economies are not growing rapidly enough to reduce unemployment despite trillions of dollars in government stimulus spending and emergency loan guarantees.

U.S. Treasury Secretary Timothy Geithner may get an unpleasant reminder of that when U.S. monthly employment data is released on Friday -- right in the middle of the G20 breakfast.

Economists polled by Reuters think the report will show virtually no net growth in employment, with the jobless rate ticking up to 9.7 percent.

For Geithner and most of his European counterparts, options for providing more stimulus are limited because either politics, creditors or both prevent them from amassing significantly larger piles of government debt.

Until rich nations find their footing, emerging markets will be the strongest source of global growth. So far, they appear to be up to the task. The IMF expects emerging markets to grow at three times the pace of advanced economies.

Those countries are clamoring for greater decision-making power at the IMF, commensurate with their growing economic prowess. This has been another thorny issue for G7 and G20 leaders who have yet to agree on how exactly to divvy up power when no one wants to relinquish their own position.

The United States thinks Europe ought to give up some if its seats on the IMF executive board, while European countries have proposed a seat-sharing rotation.

IMF officials are scheduled to attend Friday's G20 breakfast, and are hopeful that some progress can be made toward resolving reform issues by a G20 leaders summit in Seoul next month.

(Editing by Leslie Adler)

The dollar reversed a long downtrend, slamming oil and gold markets, which in turn took a toll on energy and mining stocks. Newmont Mining Corp (NEM.N) and Freeport-McMoRan Copper & Gold (FCX.N) both fell more than 2 percent.

Investors said better-than-expected weekly jobless claims limited declines, but the spotlight was on Friday's larger non-farm payrolls report.

Friday's report is expected to show payrolls were unchanged in September, but the release has bigger implications for a market hoping that weak data will spur the Federal Reserve to take further steps to boost the economy.

"This one, unfortunately, gets into the realm of economic psychology," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

"I think the market would appreciate (a number) that's a little better, but that still allows the Fed to come in."

The euro's recent rally against the dollar stalled as investors booked profits. The dollar and equities have had an inverse relationship as investors take money out of stocks for the perceived safety of the greenback.

TAKING A SHINE TO ALCOA

Alcoa Inc (AA.N) kicked off the unofficial start to earnings season after the closing bell. The largest U.S. aluminum producer reported a lower third-quarter profit, but said global markets were strengthening. Its shares rose 3.2 percent to $12.59 in extended trade.

But some lackluster earnings reports weighed on the market during the regular session after PepsiCo Inc (PEP.N) trimmed the top end of its earnings forecast, while Marriott International Inc's (MAR.N) results failed to beat high expectations. Pepsi was down 3 percent at $66.10 and Marriott slid 5.8 percent to $35.67.

The Dow Jones industrial average .DJI dipped 19.07 points, or 0.17 percent, to 10,948.58. The Standard & Poor's 500 Index .SPX eased 1.91 points, or 0.16 percent, to 1,158.06. But the Nasdaq Composite Index .IXIC added 3.01 points, or 0.13 percent, to 2,383.67.

Last month, the Fed hinted at the possibility that it might pump more cash into the U.S. economy, probably through buying bonds, in an additional round of quantitative easing to bolster the anemic recovery after the worst recession since the 1930s.

Growing conviction of further fuel from the Fed in part helped the S&P 500 rally 8.8 percent in September.

While the overall payrolls number is not expected to change, economists polled by Reuters forecast that private-sector payrolls added 75,000 jobs in September. The unemployment rate is expected to tick up to 9.7 percent from 9.6 percent in August.

BETTING ON TEEN SPIRIT

IMF Managing Director Dominique Strauss-Kahn said at a news conference that a weakening in the spirit of cooperation that grew out of the crisis was regrettable and said an adjustment in currency values must be part of economic rebalancing.

"I think it's fair to say that momentum is not vanishing but decreasing and that's a real threat," he warned. "Everybody has to keep in mind this mantra that there is no domestic solution to a global crisis."

Strauss-Kahn said he disliked the notion that a currency war was brewing because the term was "too military" but conceded "it's fair to say that many do consider their currency as a weapon and that's certainly not for the good of the global economy."

This weekend's semi-annual meetings of the IMF and World Bank -- and a Friday night session of Group of Seven finance chiefs -- are expected to provide a forum for intense discussions about efforts to persuade China to let its currency rise and tamp down pressures for other emerging countries to control capital flows.

GREATER SAY AT IMF INVOLVES GREATER RESPONSILITY

Strauss-Kahn said having a bigger say at the IMF, as requested by big emerging economies like China, comes with greater responsibility in the global economy.

"If you want to be at the center of the system ... it goes with having more responsibility in the system," he said.

In an interview published by Le Monde earlier on Thursday, Strauss-Kahn pointed at China's currency policy as a primary sticking point in efforts to rebalance the global economy.

"The undervaluation of the (Chinese) yuan is the source of tensions in the world economy which are in the process of becoming a threat," he told the news paper. "If we want to avoid creating the conditions for a new crisis, China will need to accelerate the appreciation process."

Slow-growing advanced economies want to export their way to a stronger recovery, and a weaker currency would help. The United States has repeatedly expressed frustration with the slow pace at which the yuan is rising.

China held the yuan stable during the financial crisis but in June promised to let it respond more freely to market forces, but since then it has risen only about 2.0 percent against the U.S. dollar.

A desire to protect its economy led Japan to intervene in foreign exchange markets for the first time in six years last month to weaken the yen.

Many emerging markets have initiated measures to control capital flows in a bid to keep their currencies from appreciating too rapidly.

The U.S. Federal Reserve is considering printing more money to buy assets in the hope of speeding up the pace of U.S. growth to bring down high unemployment. The side effect is a weaker dollar that is fueling global tensions.

Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 445,000, the lowest since the July 10 week, the Labor Department said.

Analysts polled by Reuters had forecast claims edging up to 455,000 from the previously reported 453,000. The government revised the prior week's figure up to 456,000.

Although the data has little bearing on September's employment report due on Friday as it falls outside the survey period, it does little to change perceptions the Federal Reserve will roll out a new asset purchasing program next month to keep interest rates low.

Non-farm payrolls were likely unchanged last month as more temporary census jobs ended and broke state and local governments laid off workers, even as private hiring picked up, according to a Reuters survey.

A Labor Department official said only one state had been estimated in last week's claims data. The four-week average of new jobless claims, considered a better measure of underlying labor market trends, to fell 3,000 to 455,750, the lowest level since the July 24 week.

The second straight week of declines in new applications for unemployment benefits pushed them further away from a nine-month high of 504,000 touched in mid-August. Claims are now in the upper end of the 400,000-450,000 range that analysts say is normally associated with labor market stability.

The number of people still receiving benefits after an initial week of aid dropped 48,000 to 4.46 million in the week ended September 25, the lowest since June 26, from an upwardly revised 4.51 million the prior week.

Analysts polled by Reuters had forecast so-called continuing claims dipping to 4.45 million from a previously reported 4.46 million.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, slipped to 3.5 percent during that period from 3.6 percent the prior week.

The number of people on emergency benefits increased 157,735 to 4.1 million in the week ended September 18.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Apparel chains appealing to young shoppers such as The Buckle, Wet Seal Hot Topic and Zumiez all reported better-than-expected sales at stores open at least a year on Thursday.

They were among the earliest results reported for the retail industry, with sales for department stores, discount chains and specialty apparel due to be released later in the morning.

Overall, Wall Street has forecast a same-store sales rise of 2.1 percent for the retail sector, according to Thomson Reuters data.

"It was a late back-to-school season that started slowly while shoppers waited for discounts," said David Bassuk, managing director at AlixPartners' global retail practice. "And it looks like they'll do the same for the holidays."

Victoria's Secret parent Limited Brands, posted a same-store sales rise of 12 percent, beating Wall Street forecasts of a 4.1 percent rise. It also forecast October same-store sales would rise in the mid-single digit percentages, and its shares jumped 3.5 percent in premarket training.

Other retailers set to report September sales results include Target Corp, Macy's Inc and Saks Inc.

Last week, the Thomson Reuters/University of Michigan Surveys of Consumers showed consumer sentiment remained at its weakest level in more than a year due to economic worries among upper-income families.

U.S. private employers unexpectedly shed jobs in September, adding to consumer anxiety about high unemployment. Shoppers say they are still buying with caution.

"I hit the sale rack first," said Fayola Romano, a medical receptionist from Brooklyn who was shopping on Wednesday at a Macy's store in Manhattan.

"I think I'm going to wait until the season gets closer, and then figure out if I am going to shop as much," she said of her holiday spending plans.

(Reporting by Phil Wahba; Editing by Michele Gershberg, Dave Zimmerman)

The soft drink and snack maker said net income was $1.92 billion, or $1.19 a share, in the third quarter, compared to $1.72 billion, or $1.09 a share, a year earlier.

Excluding items, earnings were $1.22 a share, matching what analysts polled by Thomson Reuters I/B/E/S had expected.

Revenue rose 40 percent to $15.5 billion, helped by the acquisition of its two largest bottlers.

The $7.8 billion deal closed in late February with the aim of cutting costs and streamlining the distribution of Pepsi drinks throughout North America where performance has been sluggish for some time.

Coca-Cola Co (KO.N) closed on a similar deal on Sunday.

The company trimmed the high end of its full-year outlook, saying it expects earnings per share, excluding currency fluctuations and one-time items, to rise 11 percent to 12 percent. It had previously forecast a range of 11 percent to 13 percent.

(Reporting by Ben Klayman in Detroit; Editing by Derek Caney)

Investors awaited results from Alcoa (AA.N), due to kickoff the third-quarter earnings season. The U.S. aluminum group was expected to post a modest third-quarter profit, but the main focus will be on the company's forecast to see if rising metal prices will send earnings surging in the final quarter.

Tech shares will again be in focus on Thursday after Samsung Electronics (005930.KS) posted disappointing earnings guidance, sparking slowdown concerns as prices of its key products slide, hitting shares and ending the technology group's run of record quarterly performances. The world's largest memory chipmaker, which has a tradition of beating even the most bullish estimates, faces a tough outlook as a fragile world economy has hit demand for TVs and computers.

Economic data on tap on Thursday includes weekly initial jobless claims and chain store sales for September.

On the earnings front, Micron Technology MU.N and PepsiCo (PEP.N) are among the companies expected to report.

After the bell on Wednesday, Himax Technologies Inc (HIMX.O), which makes chips for flat-panel displays, cut its third-quarter outlook to reflect order cutbacks in August and September.

Marriott International Inc (MAR.N), posted a profit that met Wall Street expectations, as corporate travel, the company's primary market, rose amid a broader business-led recovery.

The dollar fell broadly on Thursday, sliding to a 15-year low versus the Japanese yen and an all-time low against the Swiss franc on the prospect of more money-printing by the U.S. Federal Reserve.

Gold prices rose to a record high above $1,360 an ounce on Thursday, extending earlier gains made on the back of a slide in the U.S. dollar and the potential for key Asian consumer Vietnam to resume bullion imports.

European stocks were down 0.2 percent in early trade on Thursday, as investors took a breather after a sharp 2-day rally while keenly awaiting policy decisions and comments on the economy from both the Bank of England and the European Central Bank.

Tech shares slumped on Wednesday, hit by worries about demand for semiconductors and data storage. The Nasdaq bore the brunt of the day's selling, led by data system services provider Citrix Systems (CTXS.O).

The Dow Jones industrial average .DJI added 22.93 points, or 0.21 percent, to 10,967.65. The Standard & Poor's 500 Index .SPX inched down 0.78 of a point, or 0.07 percent, to 1,159.97. The Nasdaq Composite Index .IXIC dropped 19.17 points, or 0.80 percent, to 2,380.66.

(Reporting by Blaise Robinson; Editing by Karen Foster)

The Labor Department on Friday will give an initial estimate of how far off its count of employment may have been in the 12 months through March. The government admitted earlier this year that its count through March 2009 had overstated employment by 902,000 jobs.

Analysts expect a much smaller miscount this time, given the economy's growth spurt in the second half of last year.

The department blamed its 902,000 miss on faulty estimates of how many companies were created or destroyed, and it has not yet made any changes to the so-called birth-death model that produces this projection.

Once a year, it compares payroll data from its monthly surveys of employers with unemployment insurance tax reports, which give it a much more comprehensive view of actual employment. It uses these tax records to produce a "benchmark revision" to adjust for discrepancies.

"That adjustment is probably overstating the employment gains because we are in a very subdued recovery and the likelihood is that the birth-death factor is making the data look better than it otherwise would be," said Neil Dutta, an economist at the Bank of America Merrill Lynch in New York.

Tax records will probably show more businesses closed than initially estimated by the Labor Department, analysts said.

"It's not going to be that severe (as last time). A lot of it is sort of aligned with the performance in the broader economy," Dutta said, noting that the economy picked up in the second half of 2009 and entered this year strongly.

Other economists shared that view, while some said it was even possible that employment would be revised upward, citing other data, including a separate Labor Department survey of households, that had outperformed the monthly payrolls count.

They also said that while the department had not changed the birth-death model, it had incorporated new data from a period in which business start-ups were weak.

"Potentially, the model could have underpredicted for a time. With the incorporation of this new data you may see an upward revision," said Zach Pandl, U.S. economist at Nomura Securities International in New York.

"In our view, the risks are tilted toward an upward revision."

Whatever the outcome, it will probably have little implication for U.S. monetary policy, given that it is backward-looking and the economic recovery is very weak by historical standards.

But it could shed more light on the nature of the unemployment problem confronting the economy, with opinion increasingly divided on whether it is cyclical or structural.

Analysts will be looking at the sectors where job losses are concentrated. Steeper job losses than already reported in manufacturing and construction could strengthen the argument of a structural unemployment problem.