* Euro, dollar gain as Putin pulls back troops on exercise
* Russian rouble rebounds, retraces Monday's decline
* Aussie struggles in face of new central bank warning
* Non-farm payrolls, ECB meeting loom later in week
By Richard Leong and Patrick Graham
NEW YORK/LONDON, March 4 The dollar and the euro
rose against the yen on Tuesday, as signs Russia may be seeking
to avoid further escalation of its military involvement in
Ukraine pared bids for safe-haven currencies.
The euro had fallen sharply against the yen, which investors
favor in times of geopolitical tension, after Western powers
threatened over the weekend to take steps to isolate Russia
economically, raising a host of risks for Western Europe and the
But a selloff in the ruble and Russian assets halted on
Tuesday, and investors pulled money out of the perceived safety
of the yen, helped by Russian President Vladimir Putin's
ordering some troops in Russia back to base.
Putin later told a news conference he saw no need to use
military force in Ukraine's Crimea region for now.
The surprise for some traders has been the extent to which
major currencies have taken in stride the West's biggest
confrontation with Russia since the Cold War, although many
analysts had reckoned the United States and Europe were unlikely
to opt for a military response.
"The safe-haven bids have started to fade," said Sebastien
Galy, currency strategist at Societe Generale in New York. "The
risk of contagion has dropped significantly."
The euro and the dollar rose against the yen to 140.295 and
101.90 , respectively. The euro rose 0.24
percent to $1.3768.
The Swiss franc, also seen as a safe haven, retreated from
its strongest in a year against the euro, trading at 1.2140
francs compared to the Swiss National Bank's cap of 1.20.
"Given three days worth of bad headlines, I think the market
was just willing to take any sort of stability it can get," said
Geoffrey Yu, a strategist with UBS in London.
"Given the amount of reduction in risk we saw yesterday
people were just looking to get back in."
Putin's stand of no further military action on Ukraine
stoked a bounce in the ruble. The dollar fell 1.2 percent
against the Russian currency at 36.06 rubles, retracing
much of the 1.3 percent rise on Monday.
Traders were also looking ahead to major economic events
later this week.
Opinion remains deeply divided as to the European Central
Bank's likely course of action at a policy meeting on Thursday.
A higher-than-expected inflation number last Friday prompted
many to pare bets on outright easing of interest rates but that
is not the only action the bank can take.
An ECB source told Reuters there would be unanimous
agreement to end so-called sterilization of the bank's bond
purchases under the bank's Securities Markets Programme.
"I think there is some degree of easing priced into
markets," UBS's Yu said. "That's not our position but we do
think we may get some dovish talk from (ECB President Mario)
Draghi. So it may be a case of the euro rising on the decision
and falling on his comments an hour later."
UBS is also among the many banks predicting a stronger
dollar this year. That move has so far failed to materialize,
largely thanks to a halt in the flow of improving U.S. data.
Most put that down to extremely harsh winter weather,
however, and non-farm payrolls data on Friday could show a more
bullish increase of 150,000 jobs in February.