NEW YORK, Sept 6: The dollar’s rally was slowed on Friday by worse-than-expected US unemployment figures but held modest gains as worries about the eurozone economy dominated sentiment.

At 2100 GMT, the euro was quoted at $1.4260 compared to $1.4321 in New York late on Thursday.

Against the Japanese currency, the dollar was at 107.67 yen from 107.10 yen on Thursday.

The dollar managed to keep on track even after a Labour Department report -- considered one of the best indicators of economic momentum -- showed US unemployment jumped to a five-year high of 6.1 per cent as 84,000 jobs were slashed in August.

It marked the eighth consecutive month of shrinking non-farm payrolls, and was worse than expected by private economists.

Today’s employment report signaled the death knell of hope that the US can avoid recession, said Scott Anderson at Wells Fargo Economics.

But analysts said that while the US fears had largely been priced into the currency market, the weakness in other regions is more surprising.

“The dollar appears well-positioned to benefit from the misfortunes of other major currencies going forward, said Samarjit Shankar at Bank of New York Mellon.

In other words, even though the economic backdrop in the US is not exactly rosy, the eurozone and Japan appear to be in a relatively worse situation with deteriorating activity and sentiment indicators. China and India are beginning to show signs of growth moderation as well.”The euro fell to below 1.42 dollars, its lowest level since last October, after German industrial production figures for July that raised fears the biggest European economy was in recession.

The US currency has surged against the euro this week. The euro started off on Monday above $1.47.

Some analysts have begun suggesting the dollar’s rally might be short-lived.

Price action would suggest upside momentum is beginning to fade a little, said Callum Henderson, head of foreign exchange strategy with Standard Chartered Bank in Singapore.

The euro was hit by the poor economic data out of Germany. The nation’s industrial output slumped by 1.8 per cent in July from June, more than three times the downturn analysts had expected, official figures showed Friday.

The dollar had already been supported on Thursday by a survey from the Institute for Supply Management that showed a rise in service sector activity in the United States, dealers said.

On Thursday the European Central Bank also decided to keep its key lending rate unchanged at 4.25 per cent. The Bank of England meanwhile held British borrowing costs at 5.00 per cent the same day.

The decisions were widely expected, but comments by ECB president Jean-Claude Trichet moved the market afterward.

He said that the central bank had cut its 2008 growth forecast to 1.4 per cent from 1.8 per cent, and estimated growth next year at 1.2 per cent, compared with its earlier outlook of 1.5 per cent.

In late New York trade, the dollar stood at 1.1186 Swiss francs from 1.1087 Thursday.

The pound was at $1.7653 after 1.7681.—AFP