* Euro off 8-month low but longer-term view still bearish
* Upbeat U.S. employment data supports dollar vs yen
* Japan CPI as expected, muted reaction from dollar/yen
(Updates prices, adds new quotes, changes dateline from
By Patrick Graham
LONDON, July 25 Germany's influential Ifo survey
of business sentiment looked set to determine the euro's path at
the end of a week marked by a steady upwards push for the dollar
that could herald a long-forecast break higher.
In early European trade, the euro was virtually unchanged at
$1.3461, having recovered from eight-month lows around $1.3438
The Ifo numbers are among the most watched forward-looking
indicators of growth in the euro zone's largest member economy.
Both its main indicators are expected to inch lower compared to
a month ago.
"I hear more and more people going short of the euro," said
one London-based dealer. "But we have been here a number of
times before and the bottom line is that, again, the euro has
recovered a bit overnight. Ifo might be the key today."
Leading banks have been forecasting a decisive break higher
by the dollar against the single currency since early this year
but have been frustrated by lukewarm U.S. data and yield-seeking
investment flows into European stocks and bonds.
But U.S. economic numbers have finally shown some more
consistency in the past couple of months and the slightest hints
of a more hawkish tone from Federal Reserve chief Janet Yellen
have proven triggers for a jerk higher in the dollar.
A number of analysts say that may be the start of something
bigger, although there is still caution out there.
"Really, one could feel sentiment among the dealers turn
against the euro sometime in May and my feeling is that may
finally now be coming through," said Jane Foley, a strategist
with Rabobank in London.
"I did have $1.35 for the end of this year, and obviously we
have broken through that now. If it is still there in two weeks
then I will think about revising that down a little."
The essence of the argument against the euro is a poorer
economic outlook that many argue will force the European Central
Bank to take more steps - potentially the outright
money-printing resisted so strongly to date by German
The Ifo numbers are published at 0800 GMT.
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.
The day's other big number in Europe is British economic
growth for the second quarter, forecast at 0.8 percent.
Sterling has also had a rough time this week, falling back below
$1.70 for the first time in a month.
While there are more doubts about a rally stretching back a
full year, unlike the euro the pound has been able to rely on
strong support from an improving economy throughout that period.
(Editing by Catherine Evans)