May 1, 2014 / 6:46 PM / 4 years ago

FOREX-Dollar gains vs yen as sterling hits five-year peak

* Sterling rises on robust economic data

* U.S. monthly jobs data due Friday (Updates to mid-afternoon New York trading, adds comments on payrolls)

By Michael Connor

NEW YORK, May 1 (Reuters) - The dollar perked up on Thursday ahead of a U.S. payrolls report and gained against the yen as sterling scored a nearly five-year high against the greenback after robust manufacturing data bolstered optimism about Britain’s economy.

Other data also signalled labor and business growth in the United States but did little to move currency prices before Friday’s jobs data release for April, which may show America’s economy shaking off the drag of harsh winter weather.

On Thursday, the Institute for Supply Management said its index on U.S. factory activity rose to its highest since December. Other reports showed U.S. consumer spending recording its largest gain in more than 4-1/2 years, reinforcing views the economy was regaining steam.

“It appears that any jobs data weakness seen at the turn of the year was, yes, weather related,” said Christopher Vecchio, currency analyst at DailyFX.

Nonfarm payrolls increased by 210,000 in April, up from a 192,000-gain in March, according to a Reuters survey of economists. The unemployment rate is forecast slipping one-tenth of a percentage point to 6.6 percent, a five-year low previously touched in January.

The dollar index, which declined Wednesday, was ahead 0.06 percent in mid-afternoon New York trading. The dollar was up 0.02 percent against the yen to 102.26 yen and up 0.03 percent against the euro at $1.3869 in trading thinned by holidays in Europe and Asia.

The pound was worth $1.6892, a gain of 0.13 percent, after rising to an almost five-year high of $1.6921.

Sterling has gained around 10 percent against a trade-weighted basket of currencies in the past 12 months but has struggled to make progress since mid-February as many players judged the best news on the economy had been priced in.

There are growing doubts over whether inflation, investment and underlying demand in the economy will be strong enough to force the Bank of England to raise interest rates early next year, as market pricing suggests.

The euro’s continued strength in the face of a steady reining-in of U.S. monetary policy stimulus and of expectations that the European Central Bank will be forced at some stage to do the opposite has become one of this year’s dominant trends.

Policymakers at the euro zone’s central bank have talked aggressively about their willingness to take action to head off a debilitating cycle of falling prices and demand, and as such have outright opposed any further gains for the euro.

But they face substantial barriers to delivering the sort of decisive policy action that would weaken the currency at a time when capital is flooding back into the euro zone’s peripheral economies and stock markets. (Additional Reporting By Patrick Graham in London; Editing by Peter Galloway and James Dalgleish)

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