FOREX-Dollar near 3-1/2-yr high vs yen on stellar U.S. jobs growth
* Dollar near 3-1/2-year high vs yen, 3-month high vs euro
* U.S. job gains stoke speculation Fed may quit QE
* Aussie slips after China data disappointment
* Dollar/yen up 0.15 pct, Aussie/dollar down 0.1 pct
TOKYO, March 11 (Reuters) - The dollar hovered near a 3-1/2-year high against the yen and held an upper hand against other major currencies on Monday after remarkable growth in U.S. employment added to optimism over recovery in the world's largest economy.
U.S. employers added more-than-expected 236,000 workers to their payrolls in February while the jobless rate fell to a four-year low of 7.7 percent.
The jobs report signalled the economy may have developed enough momentum to withstand the blow from higher taxes and deep government spending cuts, fuelling speculation that the U.S. Federal Reserve will tone down its ultra-loose monetary policy sooner than anticipated.
"If we see another job growth of more than 200,000 in the next payroll survey, the market will surely get more excited with talk of an exit from QE," said a trader at a U.S. bank.
The dollar edged up 0.15 percent in Asia to 96.12 yen , not far from Friday's high of 96.60 yen, which was its highest level since Aug. 12, 2009.
The Fed is currently buying $85 billion a month in bonds to push down long-term borrowing costs and spur economic growth. It has said it will keep buying assets until the outlook for the jobs market has improved substantially.
While investors think the Fed's next policy step is to scale back its stimulus, they expect the world's other major central banks to ease policy further.
The Bank of Japan is perceived to be seeking a "new dimension" of easing under new governor Haruhiko Kuroda, who is expected to be appointed this month.
Many market players expect the BOJ to take fresh easing steps at Kuroda's first policy meeting on April 3-4.
Osamu Takashima, chief FX strategist at Citibank, said the dollar could rise to around 98.60 yen, a 100 percent extension of its sharp decline on Feb. 25, towards early April on the back of the dollar's broad strength.
But he warned that the yen could rebound thereafter.
"Despite the yen's fall, the options market has seen a limited rise in dollar/yen implied volatilities and risk reversal spreads, suggesting the latest yen-selling is mostly focusing on the BOJ meeting early April," he said.
US DOLLAR STANDS OUT
The dollar's index against a basket of six major currencies stood at 82.722, flat on the day and near a seven-month high of 82.924 hit on Friday.
Having risen 4.8 percent since a low hit in early February, the index is seen as on course to test its July 2012 peak of 84.10.
Data from U.S. financial watchdog also showed speculators boosted their bets in favour of the U.S. dollar in the latest week to the highest in more than seven months.
As the dollar firms broadly, the euro was a tad weaker at $1.2995, about 0.1 percent below late U.S. levels after having hit a three-month low of $1.2955 on Friday.
The British pound was just a hair above 32-months low hit on Friday, fetching $1.4918, versus Friday's low of $1.4886.
The Bank of England is widely expected to relaunch asset purchases as soon as next month to shore up the fragile UK economy.
The European Central Bank may be a bit more cautious about further easing, but reinforcing speculation of more easing, International Monetary Fund head Christine Lagarde said on Friday the ECB should lower rates and allow higher inflation.
The Australian dollar slipped following data published on Saturday showed uneven an recovery in China. Both industrial output and retail sales fell short of market expectations, leaving fixed asset investment as the key driver of economic growth.
The Aussie shed 0.1 percent to fetch $1.0223, edging towards an eight-month low of $1.0116 hit a week ago.
"After the lunar new year holidays, the Chinese economy may not be doing as strong as some had hoped. It seems like the U.S. economy is the only one that has momentum," said a trader at a Japanese bank.