* Yen on defensive as safe-haven bids unwound, no reaction
* Signs of improvement in Europe keeps euro, sterling afloat
* Pound near 3 1/2-yr high vs yen, 4-month high vs euro
* Dollar could ultimately gain if job recovery confirmed
By Hideyuki Sano
TOKYO, Sept 5 The dollar steadied just below a
six-week high on Thursday ahead of central bank policy meetings
in major economies and a crucial U.S. jobs report that could
make or break the case for a reduction in U.S. stimulus this
The yen was stuck near one-month low against the dollar,
after investors unwound their safe-haven buying spurred by
concerns over U.S. plans to attack Syria, while moving little
after the Bank of Japan maintained its policy as expected.
The dollar index stood at 82.231 , little
changed on the day but not far from a six-week high of 82.516
hit on Tuesday.
The dollar dipped on Wednesday on profit-taking and also in
part as the euro gained after data showed euro zone businesses
had their best month in over two years in August as orders
increased for the first time since mid-2011.
"Both the euro zone and British economies seem to be
improving of late. So some people who had expected more easing
from Europe may be having a rethink and adjusting their
positions," said Katsunori Kitakura, associate general manager
of market making at Mitsui Sumitomo Trust Bank.
Yet the euro last traded at $1.3185, down slightly on
the day and not far from a six-week low of $1.3138, with the key
focus now on a policy review by European Central Bank on
The bank is widely expected to reaffirm it will keep
interest rates low to support the euro zone's fragile recovery.
Some traders say the common currency could be ambushed by
rising political tensions in Italy, where allies of Silvio
Berlusconi are threatening to bring down the government if the
Senate votes to expel him following a tax fraud conviction.
Perkier than the euro was sterling, which benefited from
data on Wednesday showing the UK services sector expanded at its
fastest pace in more than six years in August
The data added to growing evidence of a broad-based pick-up
in the UK economy and bolstered market expectations that the
Bank of England may have to tighten monetary policy well before
it has indicated.
Yet analysts note that the BoE may be concerned about
markets pricing in a rate hike earlier than its own forward
guidance, and that it could deliver a warning after its policy
meeting on Thursday, which could pour cold water on the pound's
The cable stood at $1.5617 after having gained 0.8
percent so far this week.
The pound fetched 155.70 yen, within sight of a
3-1/2-year high of 156.75 yen hit in May, while the euro stood
at 0.8451 pound, near a four-month low of 0.84265
pound touched on Wednesday.
The U.S. ADP private-sector jobs number is due out on
Thursday, which could be seen as an early indicator on more
important government employment report on Friday.
If the data confirms a continued recovery in the U.S. job
market, that will be seen as ensuring the Federal Reserve will
start reducing its stimulus at its Sept. 17-18 meeting.
Expectations that the Fed will be the first to rate hikes
among major central banks have underpinned the dollar.
"I think that in the big picture, the dollar is on rising
trend. If two-year bond yield rose further, say to above 0.5
percent, that could spur more dollar buying," said a trader at a
The two-year U.S. debt yield hit a two-year high of 0.478
percent on Thursday, widening the dollar's yield
advantage over other currencies.
Against the yen, the dollar held firm at 99.71 yen,
flat on the day but just a touch below its Aug 2 peak of 99.955
yen following three straight days of gains, which traders say
was due in part to unwinding of safe-haven buying on concerns
over Syria last week.
"It seems like the market is tentatively concluding that any
military action may not last that long and its impact on the
world economy will be limited. The market is coming back to
business as usual," said Bart Wakabayashi, head of forex at
State Street Global Markets.