* Upbeat U.S. private payrolls data boosts dollar
* Yen hampered by Japan's trade deficit, economic woes
* Euro has been hit by Greek court ruling on austerity steps
LONDON, Nov 2 (Reuters) - The dollar rose to a near four month-high against the yen on Friday as investors bet on an upbeat U.S. payrolls report after private employers added jobs at the fastest pace in eight months. The euro fell to a three-week low against the dollar on selling by long-term investors. The euro has also been under pressure since a Greek court ruled on Thursday that pension reform demanded by foreign lenders may be unconstitutional. That raised concerns about Athens' ability to implement the austerity measures needed to secure bailout funds. All these drove the dollar index to a seven-week high of 80.389, breaking above its 55-day moving average of 80.14. The dollar was up 0.2 percent on the day at 80.31 yen, just shy of last week's four-month high of 80.38. Traders reported an option barrier at 80.50 yen with hedge funds ready to buy the dollar on dips if the U.S. jobs numbers disappointed. A break of resistance at 80.60-65, a chart triple top marked between May and June and a 50 percent retracement of the dollar's March to September decline, could signal further gains. ``A good U.S. jobs number will no doubt give a leg up to dollar/yen,'' said John Hardy, currency strategist at Saxo Bank. ``From a medium-term view, we are bullish on dollar/yen and the pair has established a base around 79 yen for a rally to 88 yen in a year's time,'' he said. The yen has come under pressure because recent Japanese data and corporate earnings have been soft. Third-quarter economic output data, due on Nov. 11, is also likely to have contracted. Payrolls processor Automatic Data Processing said private employers added 158,000 workers last month, bolstering expectations that the non-farm payrolls report due at 1230 GMT may beat forecasts. A Reuters poll forecasts a rise of 125,000 U.S. non-farm payrolls in October. The unemployment rate is seen ticking up to 7.9 percent. Any market reaction to the jobs data may be short-lived given the uncertainty of the outcome of Tuesday's U.S. presidential election.
EURO ZONE STRUGGLES Some, however, are less sure about a sustained rise in the dollar as investors fret over the so-called ``fiscal cliff'' of looming tax rises and spending cuts in the United States. ``Over the course of the next month we would expect to move lower in dollar/yen, any upside above 81 would be surprising driven by U.S. negativity surrounding the fiscal cliff,'' said Christian Lawrence, currency strategist at Rabobank. The euro fell 0.4 percent to $1.2885, a three-week low, as traders sold the single currency, triggering an option barrier at $1.2880. Bids from Asian central banks and Middle East investors were cited below $1.2850. However, the euro held within the $1.2800-3200 range seen since September, underpinned by the European Central Bank's pledge to buy bonds of indebted euro zone countries that seek aid. Signals in the option market showed the pair was likely to trade in a range in coming weeks. The one-month implied volatility on euro/dollar options fell to fresh five-year lows around 7.50 percent. Data on Friday showed peripheral euro zone countries were still struggling. Spain's manufacturing sector shrank last month at it fastest pace since July, while Italian factory activity shrank in October for the 15th month running. Commodity currencies eased after rallying earlier in the day. The Australian dollar hit a five-week high of $1.0420 before giving up gains to stand at $1.0380 as caution set in before the U.S. jobs data. The currency was helped by Thursday's improvement in manufacturing data from China, Australia's main export market.