* Yen broadly firmer, led by jump against AUD
* Dollar index ends flat in NY after choppy session
* All eyes still on Fed meeting next week
By Ian Chua
SYDNEY, Sept 13 The yen clung onto broad overnight gains in Asia on Friday as investors unwound bearish positions particularly against the Australian dollar, which suffered a major setback in the wake of disappointing jobs data at home.
Trading in New York, however, was choppy with markets at first favouring the U.S. dollar as investors reacted to headlines showing a steep drop in new claims for jobless benefits last week.
But the greenback then went into reverse gear after the Labor Department attributed much of the decline in benefit claims to computer problems in two states.
"So, it looks like the latest data do not reflect underlying changes in labor market conditions," analysts at JPMorgan wrote in a note.
That saw the euro erase losses to last stand near $1.3300 , well off a low of $1.3256 plumbed earlier. The dollar index dipped back to 81.533 from a high of 81.695 as a result.
The yen, though, outperformed its major peers thanks to a solid rally against the Australian dollar, which sagged after surprisingly soft employment figures prompted investors to quickly price back in the risk of an interest rate cut.
The Aussie fell about 1 percent on the yen to as low as 91.68, before recovering just a bit of ground to last trade at 92.19. On the week, it was still up 1.3 percent.
Against the euro and dollar, the Japanese currency bounced off multi-week lows. The dollar fell to 99.56 yen from a seven-week peak of 100.62, while the euro retreated to 132.38 from a 16-week high around 133.37.
Traders said the big picture is still whether the Federal Reserve will begin to scale back stimulus at next week's policy meeting and by how much.
Following last Friday's uninspiring U.S. non-farm payrolls data, markets are less worried about the risk of any major pullback from the Fed.
Indeed, many traders and analysts expect the Fed to reduce its $85 billion monthly bond-buying programme by a modest $10 billion.
A much larger number would be seen as hawkish and undoubtedly provide a boost to the dollar and put emerging market currencies under renewed pressure. Conversely, any delay in tapering will be interpreted as dovish, traders said.
Many emerging market currencies, hit hard by an outflow of funds, have retraced some of their deep losses in recent sessions.
"This is likely the result of profit taking, marginally better China data and investors becoming more sanguine over risk events next week," said Oliver Harvey, a London-based analyst at Deutsche Bank.
"From here on in, markets should discriminate more between currencies, particularly if risk remains buoyant," Harvey said, adding the Indonesian rupiah, Turkish lira and South African rand remained vulnerable.
There are no major economic data out of Asia on Friday, leaving the focus on U.S. retail sales due later in the day.