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FOREX-Yen above recent lows; euro up on stops before ECB meeting

Ian Chua and Masayuki Kitano
Thursday, 5 Dec 2013 | 2:23 AM ET

* Yen holding off 5-year low vs euro

* Euro touches 1-month high vs dollar before ECB decision

* Traders cite stop-loss buying in euro vs dollar

* Markets also cautious as U.S. payrolls loom

SYDNEY/SINGAPORE, Dec 5 (Reuters) - The yen hovered above a five-year low on the euro and a six-month trough versus the dollar on Thursday, with moves lacking conviction as investors held their bets ahead of key events, including crucial U.S. jobs data.

The dollar slipped 0.3 percent to 102.08 yen, having earlier this week risen as high as 103.38, while the euro held steady at 139.11, still not far from a five-year peak of 140.03 scaled on Tuesday.

Traders said the downtrend in the yen remained intact thanks to the Bank of Japan's ultra-loose monetary policy and expectations that it will provide even more stimulus next year.

Adding to the pressure on the safe-haven yen were expectations for a fairly nerveless year-end compared with the last few years, when markets were rattled by the euro zone's debt crisis and the U.S. fiscal cliff, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

"There is very little of the type of year-end fear that had been present the last few years, with regard to Japan, the United States and Europe," Okagawa said.

Investors often flock to liquid currencies such as the yen in times of market stress and the low-yielding Japanese currency can also gain on position squaring if investors unwind yen bearish bets during bouts of risk aversion.

The yen could gain if U.S. jobs data on Friday were to disappoint, but even then the impact might be short-lived, Okagawa added.

For now though, the focus is on European Central Bank and Bank of England meetings, a day after the Bank of Canada held interest rates steady and sounded slightly more dovish in its outlook.

The Canadian dollar touched a 3-1/2 year low versus the dollar at C$1.0708 on Wednesday, before steadying at C$1.0674 .

The euro was up 0.2 percent at $1.3626, having touched a one-month high of $1.3640 earlier on Thursday.

A trader for a Japanese bank in Singapore said there was talk of stop-loss buying in the euro at levels above $1.3600.

"Everyone is saying the move was caused by stops," he said, adding that there was also talk of stop-loss dollar selling versus the Swiss franc at levels below 0.9000 francs.

Against the Swiss franc, the dollar touched a one-month low of 0.8984 francs on trading platform EBS and was last down 0.3 percent at 0.8998.

ECB, BOE MEETINGS

The ECB is widely expected to hold off any fresh policy action on Thursday, but new staff forecasts will be in focus for signs of prolonged price weakness that could lead it to act again next year.

In any case, BNP Paribas analysts said the euro could come under selling pressure given that the ECB is likely to stay very dovish.

"The ECB's December staff inflation projections are likely to be well below the ECB definition of price stability ... the press conference should signal a continued easing bias," they wrote in a client note.

The BoE is also expected to stand pat on policy but sterling's recent strength and its potential to hurt the economic recovery could see the central bank try to talk down the currency.

Sterling inched up 0.1 percent to $1.6390, not far from a two-year peak of $1.6443 set earlier in the week.

Investors were also cautious ahead of the influential U.S. jobs report on Friday. The ADP National Employment Report showed that U.S. private-sector hiring rose in November at the fastest clip in a year, offering a brighter outlook for the labour market.

Any upside surprise in the payrolls report will no doubt keep alive expectations the Federal Reserve might start scaling back its massive bond-buying stimulus programme later this month.

That could lift the U.S. dollar and keep the pressure on commodity currencies like the Australian dollar.

The Aussie edged up 0.1 percent to $0.9035. On Wednesday, the Aussie had skidded more than 1 percent and set a three-month low of $0.8999, after third-quarter economic growth disappointed investors.