FOREX-Dollar rallies vs yen after U.S. jobs data; euro rebounds
* Nonfarm payrolls rose 165,000 in April, jobless rate at 4-year low
* Dollar on pace for biggest one-day rise in two weeks vs yen
* Euro finds support at $1.3050 area, remains vulnerable
By Wanfeng Zhou
NEW YORK, May 3 (Reuters) - The dollar surged more than 1 percent against the yen on Friday after surprisingly strong U.S. April jobs data fuelled optimism the U.S. economy may be more resilient than some had feared.
U.S. employment rose more than expected in April, with nonfarm payrolls rising 165,000, while job increases for the previous months were revised higher. The unemployment rate fell to a four-year low of 7.5 percent.
The dollar had come under pressure lately after disappointing economic data stoked concern about the recovery and investors pared back expectations the Federal Reserve may taper its bond purchases anytime soon.
"The spring slowdown may not be as pronounced as feared," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"It is good news for the dollar especially in light of the Fed's statement this week which put even more focus on upcoming U.S. economic numbers."
The dollar rose 1.1 percent to 99.05 yen, on pace for its biggest one-day rise in two weeks. It hit a session peak of 99.26 yen, according to Reuters data.
The Fed said on Wednesday after its policy meeting it will continue buying $85 billion in bonds each month to keep interest rates low and spur growth, and would step up purchases if needed to protect the economy.
"The job market and the economy in general appear to be more resilient than investors had feared," said Joe Manimbo, market analyst at Western Union Business Solutions in Washington.
"The weight this jobs report carries from month to month can go some way to reviving the notion that the Fed could taper later this year."
The euro edged higher against the dollar, rebounding after finding support in the $1.3050 area.
It last traded 0.5 percent higher at $1.3132, having hit a session low of $1.3033 in the wake of the jobs data. Traders said the euro failed to move further below $1.3050, leading to an intraday rebound.
The single currency climbed to a session peak after data showed data showed the pace of growth in the vast U.S. services sector slowed in April to its weakest in nine months, while U.S. factory orders fell sharply in March.
But analysts said sentiment on the euro remained negative after European Central Bank President Mario Draghi said Thursday the bank was technically ready for negative deposit rates and noted downside risks to the economy.
A negative deposit rate would penalize banks for hoarding cash and could drive money out of the euro zone.
"Putting the deposit rate into negative territory comes at a significant cost, undermining especially money market fund flows into weaker peripheral banks," Morgan Stanley said in note.
"Bearing these costs in mind and Draghi showing his readiness to use the negative deposit rate anyway is one of the clearest indications that the ECB wants a weak exchange rate."
Against the yen, the euro rallied 1.7 percent to 130.13 yen .