The US dollar weakened in late Asian trade as market participants took profit on the morning's mild gains before the release of key nonfarm payrolls data tonight and ahead of a long weekend in the US, dealers said. The dollar had been under pressure from overnight after another weak set of US data and on concerns the US Federal Reserve may consider halting interest rate hikes due to the economic fallout from Hurricane Katrina. But the currency managed to chalk up modest gains in subdued morning trade, prompting short-term players to take profit and square their positions just as the European session began. The soft US economic data last night included the Institute for Supply Management's manufacturing confidence index last night, which fell to 53.6 in August from 56.6 in July, a reversal from market expectations of a small rise to 57.0. The weaker data combined with expectations that Hurricane Katrina may have seriously dented economic growth and consumer sentiment in the face of high oil prices has led to concerns Federal Reserve policymakers may decide to halt its cycle of interest rate hikes at its September 20 meeting, analysts said. "The US dollar continued to weaken broadly against the majors yesterday following the weaker than expected ISM manufacturing data and paring back of expectations of Fed policy tightening as a result of the direct and indirect effects from the hurricane," strategists at Singapore's United Overseas Bank wrote in a daily note. They said although there was a possibility the Fed will pause especially after rumors surrounding a meeting yesterday between President George W. Bush and Federal Reserve chairman Alan Greenspan, "we perceive the probability of such a move as somewhat low at this point in time." Still, the outcome of US economic indicators over the next few weeks will be crucial in determining whether expectations of a Fed "pause" are justified, analysts said, and that puts even greater emphasis on tonight's payroll numbers. The median estimate in a Market News International survey of economists looks for August payrolls to rise by 185,000. Estimates range from 110,000 to 235,000. Most dealers believe payrolls need to be significantly higher than expectations to counter the dollar's current weakness, a view which led many to unwind their positions before the Labor Day long weekend, and the expected return of greater liquidity when the US returns from summer holidays next week. "This is possibly the last opportunity for the greenback to claw back the week's losses, before US markets close for an extended weekend," said Bank of Tokyo-Mitsubishi's Singapore economist, Wong Keng Siong. Euro-dollar set the pace for currency pairs in Asia today after an overnight surge helped push the pair up to 1.2525 usd, its highest since May, when key resistance above 1.2480 broke and set off stop-loss buying. The pair closed near 1.2490 in New York and drifted lower as the Asian session began. It touched a low of 1.2467 but later rebounded to 1.2490. The pair traded not far from 1.2490 through the rest of the morning but jumped above 1.2500 in the afternoon as euro was bid via euro-yen, with the move somewhat exaggerated by thin liquidity in the market. The yen market was relatively subdued in the morning with dollar-yen briefly poking its head above 110.00 yen near the start of the session, after closing around 109.90 in New York. The pair slipped soon after the Tokyo fixing but then went on to trade either side of 109.90, while euro-yen also went into a holding pattern between 137.10 and 137.35 as the morning ended. In the afternoon, dollar-yen fell to 109.75 while the cross broke higher, through to 137.40, before tapering off as players kept their eye on the movements of crude oil futures in the energy markets. Concerns about oil prices are still in the forefront but may start to ease if rates stay under their recent record highs for the time being. Crude oil prices backed off slightly in Asian trading hours but remained ominously close to 70.00 usd a barrel as supply fears plagued sentiment. New York's main contract, light sweet crude for delivery in October, was last at 69.02 usd a barrel, down 0.45 usd from its close of 69.47 in the US overnight and still off a historic high of 70.85 seen on Tuesday.