* Upbeat U.S. employment data supports dollar vs yen
* Japan CPI as expected, muted reaction from dollar/yen
* Euro off 8-month low but longer-term view still bearish
(Adds details, quotes)
By Shinichi Saoshiro
TOKYO, July 25 The dollar held gains versus the
yen on Friday and the euro stood steady after rebounding from an
eight-month low against the greenback as data painted a brighter
picture of the U.S. and eurozone economies.
The dollar was little changed at 101.76 yen after
gaining more than 0.3 percent overnight to a two-week high of
101.86 after weekly U.S. filings for first-time jobless benefits
fell to the lowest level since early 2006.
The greenback, which has been closely tracking U.S. debt
yields, was also helped by a rise in yields after the strong
employment indicator. It was poised to gain about 0.4 percent on
the week against the Japanese currency but lacked the momentum
to test the 102.00 threshold.
Market players said selling of yen crosses was a factor
capping further advances by the dollar.
"Selling of sterling, Australian dollar and New Zealand
dollar against the yen is helping prevent a further rise in
dollar/yen. Profit-taking in such yen crosses is a key driver,
rather than trades in dollar/yen itself," said Bart Wakabayashi,
head of currencies at State Street in Tokyo.
Sterling fetched 172.90 yen, on track for a 0.15
percent loss this week. The pound has declined steadily since
scaling a six-year high well above 175.00 early this month when
the market was speculating on a quick Bank of England rate rise.
The Aussie, which rose to a three-week high of 96.17 yen
on Thursday, fell back to 95.86.
The kiwi was headed for a 1 percent weekly loss versus the
yen, suffering a sharp fall on Thursday when the
country's central bank raised interest rates but said it would
hold steady for a while to assess the impact.
Japanese consumer price data was in line with forecasts and
the yen's reaction was muted as it did not stir expectations of
further monetary easing by the Bank of Japan.
Core consumer prices rose 3.3 percent in June from a year
earlier, before the effect of April's sales tax hike was
stripped out, matching forecasts.
The euro held steady at $1.3464, having rebounded on
Thursday from an eight-month trough of $1.3438 after
stronger-than-expected German and French business activity
reports slightly tempered bearish views towards the eurozone
Europe is still faced with the possible fallout from any
tougher sanctions on Russia.
The euro was on track to lose more than 0.4 percent on the
week against the dollar, with many market participants retaining
a bearish longer-term view on the common European currency.
Any targeting of Russian banks by the European Union or any
other sanctions would probably weigh on a fragile economic
recovery, stoking bets on even looser policy from the European
The ECB cut interest rates in June and has left the door
open to further monetary easing, which would hurt the euro.
Currency strategists at Morgan Stanley said key pillars of
support for the euro - foreign buying of eurozone equities and
peripheral bonds plus diversification into the currency by
central banks - were crumbling and likely to keep pushing the
euro lower in the long term.
"The prospect of additional sanctions against Russia is also
a potential negative factor for the euro. We do not see the euro
as a safe haven from recent developments in Russia/Ukraine,
especially given Europe's high level of exposure to the region,"
they said in a report to clients.
Sterling traded at $1.6989 after pulling back
overnight from a one-month low of $1.6967 after
weaker-than-expected British retail sales in June cast more
doubt on the case for a swift rise in interest rates.
The market focus is now on Britain's second-quarter GDP data
due at 0830 GMT.
The British economy is forecast to have grown 0.8 percent
from the previous quarter and anything higher could further
support sterling's bounce from the one-month trough.
(Editing by Eric Meijer and Alan Raybould)