* Dollar recovers, moves back to 100 yen
* Japan to urge public pension funds to up overseas holdings
* U.S. jobs report key to dollar positioning
By Jessica Mortimer
LONDON, June 4 The dollar recovered from a
four-week low against the yen on Tuesday with the yen hurt by a
report that Japanese pension funds could increase overseas
Sources told Reuters the government would urge public
pension funds - controlling a pool of more than $2 trillion - to
increase investments in equities and overseas assets.
The dollar was up 0.5 percent at 100.10 yen, with
traders citing option expiries at 100 yen likely to keep the
pair pinned around that level. It had fallen to a four-week low
of 98.86 yen on Monday after a survey showed U.S. factory
activity fell in May to its lowest since June 2009.
The ISM survey dimmed prospects of the Fed scaling back
monetary easing soon, even though two Fed policymakers said on
Monday the central bank could taper its stimulus in the coming
months if data improved.
With the Fed pledging to maintain stimulus until the labour
market improves, jobs numbers due on Friday will be under
"The market is very nervous at the moment because everyone
is trying to get their heads around when the Fed will reduce
QE," said Niels Christensen, currency strategist at Nordea in
He said the comments on Japan's pension fund helped the
dollar against the yen but added "more positive dollar news"
would be needed to push it significantly higher.
Analysts and fund managers said further dollar weakness was
possible as investors took profit on hefty bets it would
"Dollar's rise back to 100 yen is impressive but people will
be cautious heading into payrolls," said Ian Gunner, portfolio
manager at Altana Hard Currency Fund. "Long dollar/short yen has
been a popular trade and it is vulnerable to any repricing of QE
being tapered off."
The U.S. jobless rate is forecast to remain steady at 7.5
percent in May with the economy expected to add 170,000 new
jobs, compared with 165,000 in April. A disappointing number
could see long dollar bets being cut while a
better-than-expected data would give the U.S. currency a boost.
The dollar index was up 0.1 percent at 82.717 after
sliding as much as 1 percent to 82.428 on Monday.
The euro was 0.1 percent higher at $1.3085, off a
peak of $1.3108 reached on Monday, its highest since May 9. Euro
zone producer prices fell further in April, marking the biggest
month-on-month decrease in nearly four years and keeping alive
chances of more interest rate cuts by the European Central Bank.
The Australian dollar was down 1 percent at $0.9675
after the Reserve Bank of Australia held rates at 2.75 percent
and governor Glenn Stevens said easing was still on the table.
(Additional reporting by Anirban Nag, editing by Nigel
Stephenson and Chris Pizzey, London MPG Desk, +44 (0)207