* Dollar reverses early gains to trade down 0.4 percent vs yen
* Investors look to U.S. GDP, jobs data after strong ISM
* Euro retreats from five-year high vs yen but rises vs dollar
By Wanfeng Zhou
NEW YORK, Dec 3 (Reuters) - The yen climbed against the dollar and the euro on Tuesday, rebounding from losses as falling stock markets worldwide sent some traders into the relative safety of the Japanese currency.
The dollar slipped against the euro and a basket of currencies but the decline could be short-lived on a view that the Federal Reserve may begin to reduce its huge bond-buying economic stimulus earlier than some had anticipated.
After a strong U.S. ISM factory report on Monday, investors are looking to U.S. economic growth data on Thursday and, in particular, U.S. nonfarm payrolls numbers on Friday, for further signs of when the Fed may act.
The dollar fell 0.5 percent to 102.37 yen after reaching 103.37 yen in Asian trading, according to Reuters data. That was close to its 2013 high of 103.73 yen, a level dollar bulls have been targeting.
"The yen caught a reprieve from extreme selling as a solid coat of red across global bourses spurred a round of safe-haven interest," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"Sentiment, though, remained decidedly bearish on the view that the Bank of Japan will press ahead, and maybe extend, its current pace of support to the world's No. 3 economy."
Trading volumes of dollar/yen were almost double the average over the past month, according to data from the Reuters dealing platform. The dollar is up 18 percent against the yen this year and rose strongly over the past month on expectations the Fed would soon scale back its bond-buying program while Japanese monetary policy remained loose.
The BoJ's commitment to easy policy makes the yen the best funding currency for investing in higher-yielding assets in so-called carry trades. When riskier assets such as stocks fall, investors would buy back the yen, giving it a perceived safe- haven status.
Net yen short positions were at their highest since July 2007, according to data from the Commodity Futures Trading Commission.
"There are certainly signs that short positioning is becoming more stretched at current levels, while our short-term valuation model is signaling the yen is becoming more undervalued," said Lee Hardman, currency economist at BTMU in London.
"The key is the payrolls report on Friday," Hardman said. "If it's another strong report, then it could push dollar/yen higher."
The euro retreated from a five-year high to 139.20 yen, down 0.1 percent on the day.
Against the dollar, the euro rose 0.4 percent to $1.3600 on expectations the European Central Bank would leave interest rates unchanged this week after above-forecast inflation data last Friday.
"Status quo on ECB monetary policy should persist until the end of the year, with no negative rates in sight," said Francesco Scotto, portfolio manager at RTFX Fund Management in London. "Euro/dollar is still on a bullish trend and should maintain this tone until the end of the month."
Against a basket of currencies, the dollar index lost 0.4 percent to 80.58.
The Australian dollar was up 0.2 percent against the U.S. dollar at $0.9118 after data showed solid net exports in the July-September period, as well as firm retail sales in October.
Earlier, the Reserve Bank of Australia reiterated after a policy meeting that the Aussie was still uncomfortably high.
"While we remain bearish on the Australian dollar, given general upside pressure on U.S. yields the past week, month, and quarter, a rebound today could offer an opportunity to resell the currency higher toward 0.9280 ahead of nonfarm payrolls on Friday," said Christopher Vecchio, currency analyst at DailyFX.com in New York.