* Biggest non-farm payrolls rise in 4 months forecast
* Euro under pressure, close to one-month low vs dollar
* ECB committed to also using unconventional tools-Draghi
By Anirban Nag
LONDON, April 4 The dollar was in demand on Friday, trading at a five-week high against a basket of currencies, as investors positioned for the possibility of an upside surprise in U.S. non-farm payrolls due later in the day.
Analysts polled by Reuters expect 200,000 jobs to have been created in March, which would be the highest in four months, after rising by 175,000 in February. The unemployment rate is seen falling one-tenth of a percentage point to 6.6 percent.
The dollar index was up at 80.532, its highest level since Feb. 27. The currency was bolstered by a recent rise in rate-sensitive U.S. short-dated yields with the two-year Treasury yield trading near a seven-month high.
"We are pretty positive it will be a good U.S. jobs number, partly because the impact from the harsh winter will wane and also because all the forward-looking indicators have been pointing to a pickup in the labour market," said Manuel Oliveri, FX strategist at Credit Agricole.
"What this means is we will have U.S. yields pushing higher and this will help dollar/yen grind higher. Better risk sentiment, given U.S. stocks are also rising on better growth prospects, will also weigh on the yen."
Against the yen, the dollar was steady at 103.90 yen, after rising as high as 104.12 yen on Thursday, its first time above the 104 level since Jan. 23. The yen is usually sought as a safe-haven during times of economic uncertainty.
"Some voices are talking about targets of 108, 110 yen for the dollar again," said Masashi Murata, senior currency strategist at Brown Brothers Harriman. "Still, for now, the dollar will likely have a tough time rising above 105 yen," he said.
The euro hit a one-month low against the dollar, having suffered a setback after the European Central Bank opened up the possibility of printing money following a widely expected decision to leave interest rates unchanged.
ECB President Mario Draghi said the Governing Council was unanimous in its commitment to also using "unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation."
The unconventional instruments included quantitative easing(QE), the printing of money to buy assets, measures that previously were considered highly undesirable by some euro zone central bankers.
The euro fell to a one-month low of $1.3695, extending losses suffered on Thursday as Draghi flagged the chances of QE.
Against the yen, the euro shed 0.2 percent to trade at 142.30, pulling away from a four-week peak of 143.48 set on Wednesday.
"Draghi was cautious and raised the prospects of inflation undershooting," said Credit Agricole's Oliveri. "Investors will tend to stay away from the euro as a higher currency will spur expectations of more ECB action."
The growth-sensitive Australian dollar rose about 0.1 percent to $0.9243, moving back toward its four-month peak of $0.9310 touched earlier this week. (Additional reporting by Lisa Twaronite; Editing by Louise Ireland)