FOREX-Yen rises broadly on turmoil in Egypt, Portugal
* ADP shows more jobs created than expected in U.S. private sector
* U.S. jobless claims fall for 2nd straight week
* Euro hits five-week low versus dollar on Portugal woes
NEW YORK, July 3 (Reuters) - The yen rose across the board on Wednesday as political instability in Egypt and Portugal prompted investors to seek refuge in the Japanese currency, although it did trim gains against the dollar after data showed a stabilizing U.S. labor market.
The yen was broadly supported by worries about the Egyptian unrest, which pushed oil to a 14-month peak due to fears about a disruption in crude supply. Political turmoil in Portugal also underpinned the yen against the euro, which fell after four straight days of gains.
The dollar however did get a modest reprieve against the yen following data showing the U.S. private sector created more jobs than expected in June, adding 188,000 positions, while U.S. initial weekly jobless claims fell for a second straight week.
The reports boded well for Friday's U.S. non-farm payrolls data and more importantly affirmed a growing conviction the Federal Reserve will scale back its quantitative easing program sooner than expected.
"The U.S. labor market numbers do signal a better number for Friday's employment report and just add to the (quantitative easing) tapering message and that's positive for the dollar," said Greg Moore, currency strategist, at TD Securities in Toronto.
In early New York trading, the dollar fell 0.9 percent to 99.69 yen, slightly recovering from the day's lows of 99.24 yen. The euro was also hit, down 1 percent at 129.24 yen .
Europe's common currency earlier hit a five-week low against the dollar after political tension in Portugal pushed up the borrowing costs of lower-rated euro zone countries. The euro fell to $1.2921, its lowest since late May. It was last down 0.1 percent at $1.2964.
The resignation earlier this week of two ministers threatened to force an election over continued budget austerity, risking Portugal's goal of exiting its 78-billion-euro bailout by returning to regular bond markets next year.
Portuguese 10-year bond yields topped 8 percent and equities slid as media reports said two more government ministers were ready to resign after the finance and foreign ministers quit earlier this week.
Spanish and Italian yields also rose on worries the euro zone was set for another round of instability.
Meanwhile, the dollar index, which measures the currency's value against a basket of currencies, slipped 0.1 percent at 83.425, off an earlier five-week peak of 83.717.
Traders were cautious before a U.S. market holiday on Thursday that could spark volatile movements due to low volumes.
However, expectations the Fed will scale back stimulus while other central banks are more likely to ease policy are expected to support the dollar.
The higher-yielding Australian dollar slid to a near three-year low of US$0.9052 after Reserve Bank of Australia Governor Glenn Stevens said he was surprised by the resilience of the currency.