FOREX-Dollar jumps vs euro, yen as data boosts views on Fed taper
* Dollar hits over one month high versus euro and yen
* Uncertainty on Syria supports safety bid for dollar
* Euro/dollar implied vols rise as spot drops
* Focus on Friday U.S. jobs data
NEW YORK, Sept 3 (Reuters) - The dollar hit a six-week high against a basket of major currencies on Tuesday as strong U.S. manufacturing data supported expectations that the Federal Reserve in a few weeks may start reeling in its stimulus.
Data from an industry group showed the U.S. manufacturing sector grew at its fastest pace in more than two years in August, bolstering expectations for faster overall growth in the second half of the year.
The dollar, which hit more than one-month highs against the euro and the yen, was also favored for its status as a safe-haven amid ongoing uncertainty on whether the United States will conduct a military strike against Syria.
U.S. President Barack Obama opted to seek congressional authorization for military action against Syria, a move that was likely to delay any strike for at least several days.
Congress returns from its summer recess on Sept. 9, and any vote to authorize a strike will come after that. While Obama has been pushing Congress to back his plan, passage is by no means certain, easing concerns over an imminent strike. Obama, however, won backing from two key Republicans - Eric Cantor, the majority leader of the House of Representatives, and Senator John McCain, of Arizona.
The yen, another traditionally safe-haven currency, briefly rose on a media report that Russian radar detected two ballistic "objects" that were fired toward the eastern Mediterranean, but it gave up those gains after Israel's defense minister said that Israel had tested a U.S.-backed missile system in the Mediterranean.
"The reaction does speak volumes about the nervousness of the markets as traders await the escalation of conflict with trepidation," said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York.
The dollar index, which measures the greenback against a basket of six major currencies, hit a high of 82.505, its highest since July 22. It last traded at 82.458, up 0.5 percent.
"Although President Obama has stressed the limited aspect of any engagement in Syria, the markets continue to be concerned about any possible fallout from the U.S. military action that could precipitate and the market will therefore remain jittery for the near term," Schlossberg said.
The dollar was also helped by a spike in Treasury yields, which move inversely to price, as the data reinforced beliefs that the Fed will start withdrawing stimulus, especially if the U.S. jobs market shows more signs of improvement.
The Fed's next policy meeting is on Sept. 17-18, which will be after the release this Friday of payrolls data for August.
The interest rate-sensitive 2-year Treasury note yield hovered near its highest since July 2011.
Against the yen, the dollar rose as high as 99.86 yen, not far from its Aug. 2 peak of 99.94 yen. It last traded up 0.5 percent at 99.78 yen, off a low of 99.14 yen struck after the reports from the Mediterranean.
Outside of overseas developments, Friday's nonfarm payrolls data will be crucial to market sentiment. A rise in August job gains that tops estimates would cement expectations that the Fed will announce plans to trim its stimulus at its upcoming policy meeting.
Economists are forecasting employers added 180,000 new jobs last month after hiring 162,000 workers in July, according to a Reuters poll.
The euro fell against the dollar, weighed by expectations that the European Central Bank this week will reiterate its pledge to keep interest rates low to support a nascent recovery.
"Investors do not want to be long euros heading into the ECB meeting this Thursday," said Geoffrey Yu, currency strategist at UBS. "We haven't heard for a while from Draghi. We expect him to say conditions remain soft despite an improvement in the data and pledge to keep rates low."
Mario Draghi, president of the ECB, will hold a news conference after the bank's policy meeting.
The euro fell to $1.3137, its lowest level since July 22, and was last trading 0.3 percent lower at $1.3148, according to Reuters data.
Reflecting investor nervousness, one-month euro/dollar implied volatility, a gauge of expected price swings and derived from option prices, has risen to 1-1/2-month highs of around 8.6 percent.
The one-month risk reversals are also showing an increasing bias for euro puts/dollar calls, or bets the single currency will weaken. The risk reversals were trading 1.3 vols in favor of euro puts, up from around 1 just a week ago.