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Written by: Staff

TOKYO, Apr 7 (Reuters) The euro slipped further from a seven-month high against the dollar on Friday, extending losses for a second day after the European Central Bank chief smothered market expectations for an interest rate rise in May.

After the ECB kept its key overnight rate at 2.5 percent as expected, Jean-Claude Trichet said the central bank did not share the same view as the market, which had girded for a clear signal that the central bank would tighten policy again next month.

The euro had surged all week on building expectations for such a signal and suffered across the board, retreating from an all-time peak versus the yen and 15-month highs against the pound.

''The market was positioned exactly against what he ended up saying,'' said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.

In early Asian trade, the euro slipped 0.2 percent to $1.2200, sliding from a seven-month peak of $1.2333 hit before Trichet's remarks.

Traders said stop-loss orders around $1.2180 were seen keeping the euro's fall in check for now, but if that level is pierced, the currency could fall to $1.2150.

Against the Japanese currency, the euro slipped to 143.80 yen, extending losses from 144.88 yen hit on electronic trading platform EBS the previous day -- the highest since the euro was launched in January 1999.

The dollar was little changed at 117.85 yen.

While the dollar enjoyed a respite from this week's battering, traders said the U.S. currency was unlikely to gain much as the market sees the Federal Reserve ending a nearly two-year credit tightening campaign in May or soon thereafter.

With the market's gaze firmly trained on rate differentials among major currencies, traders were looking to U.S. jobs figures due at 1230 GMT for clues about the Fed's way forward.

Economists in a Reuters poll expect the non-farm payrolls data to show a gain of 190,000 jobs in March, compared with an increase of 243,000 jobs a month earlier. The unemployment rate is forecast to hold steady at 4.8 percent.

The Fed has raised rates 15 times since mid-2004, pushing its funds rate to 4.75 percent. The run of hikes was a major driver behind the dollar's 15 percent rally last year against the euro and the yen.

Fed officials have signalled this week that they are nearly done lifting rates but that future action would depend on incoming economic data, making the employment data all the more crucial for the dollar's near-term performance.

Reuters PG VP0700

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