FOREX-Dollar drops vs yen on Fed view; dairy scare hits NZ dlr
* U.S. dollar stays soft after Friday's weak jobs data
* Dollar bounces on U.S. ISM non-manufacturing data
* Kiwi dollar slides as bacteria found in NZ milk products
NEW YORK, Aug 5 (Reuters) - The dollar fell for a second session against the yen on Monday after Friday's U.S. jobs figures lowered expectations that the Federal Reserve would start to buy fewer bonds in the near term.
But losses were limited after data showing an acceleration in the pace of growth in the U.S. services sector in July, which added to views that economic growth will pick up in the latter half of the year.
The dollar has lost 3 percent versus major currencies since its high on July 9 as expectations faded the U.S. central bank may start scaling back its stimulus as early as September. The Fed offered no indication of a near-term move after a policy meeting last week.
"Ongoing uncertainty about whether the Federal Reserve will be able to taper its monthly bond buying as part of its quantitative easing program continues to weigh on the greenback," said Samarjit Shankar, director of market strategy at BNY Mellon in Boston.
Less stimulus could provoke a rise in bond yields, making the dollar more attractive for investors.
The dollar fell 0.4 percent to 98.58 yen, trading in a narrow range between 98.27 and 99.15 yen.
The ISM services reading followed data on Friday showing U.S. job growth of 162,000 last month, the smallest gain in four months and below analysts' expectations.
The euro slipped 0.2 percent to $1.3257, stuck below chart resistance and session high at $1.3300 and last week's peak of $1.3344.
Retail sales in the euro zone fell across the board for the first time in three months in June, data showed on Monday, highlighting the drag of depressed household spending on the bloc's fragile recovery. But euro zone business expanded for the first time in 18 months in July, albeit very slightly.
The New Zealand dollar tumbled to a one-year low against the U.S. dollar after New Zealand's major dairy exporter, Fonterra, said it had found bacteria in some of its products that could cause botulism.
China halted the import of some dairy products from New Zealand and Australia in response.
The New Zealand dollar was last down 0.5 percent at $0.7793 . The next key chart support was at the June 1, 2012, low of $0.7456.
Dairy produce accounts for about a quarter of New Zealand's export earnings and any development that could hurt its exports typically causes the currency to fall.
"If this scandal worsens and if more countries put a ban on New Zealand's dairy imports ... then I would imagine the New Zealand dollar would weaken," said Jane Foley, senior currency strategist at Rabobank, adding that it could drop toward $0.70.
She said the currency would recover if the crisis was managed well by the New Zealand authorities.
Other factors may also weigh on the currency. Hans Redeker, head of global FX strategy at Morgan Stanley, said New Zealand's substantial foreign liabilities - it had a current account deficit of 4.8 percent of GDP at the end of March - made it vulnerable to declines in investor appetite for risk.
The dollar index, which tracks the greenback versus a basket of six currencies, was little changed at 81.902.
The Australian dollar hit a three-year low of $0.8848 after weak retail sales data bolstered expectations that Australia's central bank would cut interest rates on Tuesday. But it recovered to last trade little changed at $0.8901.
The UK pound rose 0.4 percent to $1.5350, lifted by a strong UK services-sector survey.