FOREX-Dlr takes breather after hitting 3-mth high vs yen

* Yen edges up as investors take profits on higher-yielders

* BOJ tankan improves, matches expectations

* Kiwi falls after IMF says it is overvalued

By Satomi Noguchi

TOKYO, April 1 (Reuters) - The dollar eased against the yen on Thursday, taking a breather after hitting a three-month peak on speculation that Japanese investors will look for higher returns abroad now the new fiscal year has started.

Analysts said the yen's broad slide this week had been fast partly due to flows linked to the month-end and quarter-end, but that now some traders may be more inclined to take profits from gains in the dollar and other major currencies.

The Bank of Japan's tankan survey showed Japanese business sentiment improved in March to its highest level since September 2008, but the yen took the report in stride as it nearly matched expectations. [ID:nTOE61E037]

The New Zealand dollar fell sharply after the International Monetary Fund said it is currently overvalued by 10-25 percent. [ID:nWEN2322].

"We are cautious of predicting further dollar gains just as the market has exceeded our expectations, which were for dlr/yen to mark 93 yen at the end of June," said Masafumi Yamamoto, chief FX strategist at Barclays Capital in Japan.

"There is a risk that dollar/yen will reverse its recent gains, but the price action suggests the dollar's downside looks very limited."

The U.S. dollar fell 0.1 percent from late New York trade on Wednesday to 93.37 yen JPY= after earlier rising to a three-month peak of 93.65 yen on trading platform EBS.

Traders say sentiment towards the yen is turning bearish heading into the new quarter. Many expect a pick up in Japanese investor demand for foreign currencies, better risk appetite, expectations that U.S. Treasury yields will rise, and widening rate differentials over Japanese government bonds to weigh on the yen.

Traders are eyeing the next major resistance at around its early January high of 93.78 yen and say a daily close above 93.80 yen would be a bullish event for the dollar and could take it past 95.00 yen in the near term.

Japan's big manufacturing firms assumed dollar/yen exchange rates at 91.00 yen for the 2010/11 business year, the BOJ's quarterly tankan shows.

Daisuke Karakama, a market economist at Mizuho Corporate Bank, said the yen's recent broad weakness may not have been reflected in the figure as the survey started in late Feb. But the result also suggested Japanese firms are staying conservative with their currency estimations in planning business this fiscal year.

U.S JOBS DATA

Some players said the greenback may stay on the defensive against other major currencies after Wednesday's ADP data showed private-sector employers cut jobs this month, despite forecasts for a gain. The data raised market caution that expectations for Friday's government payrolls numbers may be too high. [ID:nWEN2273].

Analysts are expecting the government jobs report to show the U.S. economy added 190,000 jobs in March, albeit aided by temporary government hiring for the 2010 U.S. Census.

The dollar index .DXY =USD was little changed at 81.067, having been hurt by the greenback's fall the previous day on the disappointing ADP numbers and quarter ending fixing flows.

For the first quarter, the index rose 4 percent -- its best quarterly performance since the first quarter of 2009.

Expectations that the Federal Reserve will raise interest rates from record lows before central banks in Japan and Europe tighten monetary policy, also boosted the dollar.

The euro EUR= erased an earlier spike to $1.3562 and traded flat at $1.3503, remaining vulnerable to sovereign risks festering in the background.

It dipped 0.1 percent to 126.13 yen EURJPY=R as traders booked profits from gains to a two-month high of 126.62 yen struck earlier after having broken past resistance around 125.40 yen in the previous session.

The New Zealand dollar NZD=D4 fell 0.8 percent to $0.7052 and it dropped 0.9 percent to 65.84 yen NZDJPY=R after earlier striking an over two-month peak around 66.50 yen. (Additional Reporting by Anirban Nag in Sydney; Editing by Joseph Radford)