* Putin pulls back troops near border with Ukraine
* Russian ruble rebounds, retraces Monday’s decline
* U.S. nonfarm payrolls, ECB meeting loom later in week
By Gertrude Chavez-Dreyfuss
NEW YORK, March 4 (Reuters) - The yen and Swiss franc fell on Tuesday while the rouble rebounded, as signs Russia may be seeking to avoid further military involvement in Ukraine diminished bids for safe-haven currencies.
The Japanese unit had rallied versus the dollar and the euro the previous session after Russia invaded Crimea over the weekend. That shook financial markets and prompted investors to seek the safest of assets such as U.S. Treasuries and highly liquid currencies such as the yen and Swiss franc.
These moves were reversed on Tuesday as Russian President Vladimir Putin said he would use force in Ukraine only as a last resort, allaying market fears that East-West tension over the former Soviet republic could lead to war. Putin ordered troops involved in a military exercise in western Russia, close to the border with Ukraine, back to their bases.
“The conciliatory tone offered today by President Putin and the removal of Russian troops from the Eastern Ukrainian border that were activated for ‘planned military drills’ has offered reason anew to be bullish on risk assets,” said Christopher Vecchio, currency analyst at DailyFX, a division of New York-based broker FXCM.
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.
In late trading, the dollar rose 0.8 percent to 102.23 yen , recovering from a one-month low hit on Monday. The euro also climbed versus the Japanese currency, up 0.8 percent at 140.42 yen.
Against the Swiss currency, both the dollar and euro advanced 0.5 percent at 0.8872 franc and 1.2188 francs , respectively.
Putin’s stance on Ukraine stoked a bounce in the ruble. After surging to a record high on Monday, the dollar declined 1.2 percent against the Russian currency at 36.08 rubles.
Ukraine’s hryvnia also posted sharp gains versus the greenback, which fell 6.3 percent to 9.0 hryvnias
With geopolitical tensions easing in Ukraine, traders are 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 an outright easing of euro zone 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 Program.
But Bank of America Merrill Lynch analysts ruled out any major policy action on Thursday.
“The ECB is not ready to fire a ‘bazooka’ in this week’s meeting, despite very low inflation and rising deflation risks,” BofA analysts said. “We do not believe that the ECB is convinced yet that deflation risks are substantial enough.”
Investors are also squarely focused on Friday’s U.S. nonfarm payrolls report. According to a Reuters poll, the data could show a more bullish increase of 150,000 jobs in February.