* Dollar reverses early gains to trade down 0.3 pct vs yen
* Investors look to U.S. GDP, jobs data after strong ISM
* Euro retreats from five-year high vs yen
By Laurence Fletcher
LONDON, Dec 3 The yen recovered from early
losses to trade higher against the dollar and euro on Tuesday,
as investors took profits from a month-long rally and global
equity markets declined, driving demand for the safe-haven
The dollar was down 0.3 percent against the yen at
102.65 yen after reaching 103.38 yen in Asian trading. That was
close to its 2013 high of 103.74 yen, a level dollar bulls have
Trading volumes of dollar/yen were almost double the average
over the past month, according to data from the Reuters dealing
platform. The dollar is up 18 percent against the yen this year
and rose strongly over the past month, on expectations the U.S.
would soon scale back its bond-buying programme while Japanese
monetary policy remained loose.
After a strong U.S. ISM factory report on Monday, investors
are now looking ahead to GDP data on Thursday and, in
particular, non-farm payrolls numbers on Friday for further
signs of when the Fed will act.
"The momentum is still for dollar/yen to move higher," said
Lee Hardman, currency economist at BTMU. "But there are
certainly signs that short positioning is becoming more
stretched at current levels, while our short-term valuation
model is signalling the yen is becoming more undervalued."
The yen has been under pressure for weeks, as the BOJ's
commitment to easy policy made it the best funding currency for
investing in higher-yielding assets - so-called carry trades.
Net yen short positions were at their highest since July
2007, according to data from a U.S. financial watchdog.
"The key is the payrolls report on Friday," BTMU's Hardman
said. "If it's another strong report, then it could push
The MSCI World Equity index was down 0.2
percent and European shares were 1 percent off.
Investors have been tending to buy the yen when their appetite
for risk fades.
Nikkei futures, which are strongly correlated with
the dollar/yen pair, were down 1.2 percent, broadly helping the
The euro retreated from a five-year high of 140.03 yen to
139.33 yen, a slight loss. But it rose 0.3 percent to
$1.3575 on investor confidence the European Central Bank
would leave interest rates unchanged this week after
above-forecast inflation data last Friday.
"Status quo on ECB monetary policy should persist until the
end of the year, with no negative rates in sight," said
Francesco Scotto, portfolio manager at RTFX Fund Management.
"Euro/dollar is still on a bullish trend and should maintain
this tone until the end of the month."
The Australian dollar was up 0.3 percent at $0.9124
after data showed solid net exports in July-September as well as
firm retail sales in October.
Earlier, the Reserve Bank of Australia reiterated after a
policy meeting that the Aussie was still uncomfortably high.