FOREX-Dollar gains as investors eye U.S. data for taper clues
* Investors focus on U.S. jobs data, ISM
* Euro falls after asset quality snapshot
* Euro zone PMI in line with forecasts
LONDON, Jan 2 (Reuters) - The dollar rose against the euro and the yen on Thursday with investors focused on whether U.S. economic data will support the case for the Federal Reserve gradually scaling back its bond-buying stimulus this year.
The euro - the strongest-performing major currency in 2013 - was down 0.3 percent at $1.3718.
The U.S. currency was up 0.1 percent at 105.35 yen, close to a high of 105.41 yen set on Monday, according to Thomson Reuters data, the dollar's strongest level versus the yen since October 2008.
Dollar/yen stayed in a narrow range, with Japanese financial markets closed on Thursday and Friday for the New Year's break.
Volumes were low in late December and prices driven by factors such as euro zone banks repatriating funds to shore up their capital bases before the European Central Bank's year-end review of their assets, which supported the euro.
However, traders will closely watch U.S. weekly jobless claims and the Institute for Supply Management's index of national factory activity later on Thursday for indications of the strength of the U.S. recovery.
"Last week the market was mainly determined by position rescaling," said Ulrich Leuchtmann, head of currency research at Commerzbank in Frankfurt.
"Today is the first day where fundamentals work out again... That's why there is pressure on euro/dollar."
While few analysts expect the ECB, which holds a policy meeting next week, to change interest rates in the near future, the Federal Reserve is closely monitoring the strength of the U.S. recovery to gauge the pace at which it scales back its bond-buying.
"The sensitivity to surprises in data in the euro zone is much lower than the sensitivity to surprises in the data in the U.S." Leuchtmann said.
The Fed said in December that it would trim its monthly asset purchases by $10 billion to a total of $75 billion per month from January.
"A focal point is whether there is going to be a reduction of $10 billion at every meeting, or whether they will wait and see for a while," said Teppei Ino, a Singapore-based analyst for the Bank of Tokyo-Mitsubishi UFJ.
Germany's manufacturing PMI for December came in marginally above expectations at 54.3 on Thursday, while the euro zone manufacturing PMI was in line with forecasts at 52.7, helping support the euro. Readings above 50 indicate expansion.
The Australian dollar rose even after official Chinese data released on Wednesday underscored the view that the world's second-largest economy lost some momentum in late 2013. China is Australia's top export market.
The Aussie dollar gained 0.1 percent to $0.8888
A separate private survey released on Thursday showed China's factory activity expanded at the slowest pace in three months in December.
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