JPY pulled back from its Asian session highs amid reports of bargain hunting in the crosses following reserve management interest for GBP and EUR. USD-JPY stabilized after hitting 95.71 and is changing hands in the low 96s, although the dollar is generally a touch easier in early trade and further gains are capped.

EUR-JPY pushed back in to 134.75 versus the 133.60 area in Asia and GBP-JPY traded back in to the 157.80 area versus 156.40 lows. There have been reports of Japanese investor demand due to more investment trust launch activity. Most of the flow has tended to favor U.S. corporate bonds, but lower U.S. yields have resulted in selling from those hedging structured derivative products. The JPY crosses are likely to lead in holiday thin trade, while USD-JPY option congestion remains at 96.00-96.50.

* Euro edging off lows after being hit by stop-loss orders

* Mood remains cautious after bleak U.S. jobs numbers

* But Reuters poll shows Aussie, kiwi to be well supported

The euro struggled back from its lowest levels in a week on Friday, after a wave of sell orders compounded losses made on bleak U.S. jobs numbers, and it found support as some investors judged it may have slipped too far.

Dealers said the euro hit stop-loss sell orders around $1.3980, and possible hedge fund selling, in the crossover between late U.S. trade and the start of the Asian day, sending it down to $1.3927 EUR= on electronic trading platform EBS.

The euro and currencies such as the Australian dollar, which have benefited from investor hopes for economic turnaround, had already weakened on Thursday after data showed U.S. employers cut 467,000 jobs in June, far more than expected. [ID:nN01210643]

But analysts said market players then bought the euro back on Friday, helping it off the lows, although it was still weaker than before the employment data and investors were still dismayed the jobs numbers spelled a slower recovery than hoped.

"The risk in the very short term is that maybe we could see some corrective activity. But I don't think we're going into serious risk aversion mode," said Sharada Selvanathan, a currency strategist at BNP Paribas in Hong Kong.

The euro stood at $1.3982 EUR= on EBS, after shedding more than 1 percent on Thursday. It had hit a one-month high above $1.4200 earlier in the week.

The euro dropped as far as 133.58 yen EURJPY=R on Friday, after falling nearly 2 percent on Thursday, but had edged back to 134.18 yen later in Asian trade.

It had also faced selling pressure after comments from European Central Bank President Jean-Claude Trichet the previous day that euro-zone activity would likely remain weak for the rest of the year. The ECB left its benchmark refinancing interest rate at a record low of 1 percent, as expected. [ID:nL2512532]

The dollar was steady against the yen at 95.96 yen JPY=, holding well within a range of 93.50-100 that has limited it since mid-April.

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Dollar rises vs euro, falls vs yen after jobs data * ECB holds key rate at record low 1.0 percent as expected * New orders for U.S. manufactured goods rise in May * China quells FX reserves speculation, supports dollar (Adds analysts' comments, detail about U.S. jobless rate and more on China official's remarks)

By Vivianne Rodrigues

NEW YORK, July 2 (Reuters) - The dollar rose versus the euro and fell against the yen on Thursday as a report showing a larger-than-expected drop in U.S. non-farm payrolls in June, renewed concerns about the economic recovery's pace.

U.S. Treasury bonds rose and U.S. stocks fell as the data raised risk aversion, enhancing the dollar's safe-haven appeal.

Analysts said demand for the euro also fell after European Central Bank President Jean-Claude Trichet said euro-zone activity would likely remain weak for the rest of the year.

The ECB left its benchmark refinancing interest rate at a record low of 1 percent, as expected. Trichet said stabilization in 2010 would be followed by a recovery. For details, see [ID:nL2512532].

"The weak jobs report reinforced a trend already in place in the forex market prior to the release, that is, that the dollar was oversold," said Camilla Sutton, a currency strategist at Scotia Capital, in Toronto.

"Euro/dollar has been stuck in a range and with weak data like today's, the euro will not get the support to break through $1.42," she added.

In late morning trading in New York, the euro was down 1 percent at $1.3998 EUR=, retreating from $1.4201 hit on Wednesday, its highest since early June. The dollar slipped 0.6 percent to 95.99 yen JPY=EBS, after trading as high as 96.89 yen before the jobs report.

U.S. JOBLESS RATE NEAR 26-YEAR HIGH

U.S. employers cut 467,000 jobs in June, far more than expected, while the unemployment rate rose to almost a 26-year high of 9.5 percent, the government said. The report showed the country's labor market is still struggling with a deep recession. [ID:nN01210643]

"If you were banking on the U.S. driving a vigorous recovery, think again," Alan Ruskin, chief international strategist at RBS, said in a note. "The employment report can largely be taken at face value, and the face value story is a labor market that is not improving nearly as rapidly as the May data suggested."

Another report showing new orders for U.S. manufactured goods jumped 1.2 percent in May had limited impact on the foreign exchange markets. [ID:nN0220084]

Traders said volume is expected to dwindle this afternoon before the three-day weekend for the Independence Day holiday in the United States. Financial markets will be closed on Friday and will re-open on Monday.

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TORONTO (Dow Jones)--The dollar posted relatively large gains versus the euro and most other major currencies Thursday, after a weak U.S. June nonfarm payrolls report encouraged currency players to shy away from risk ahead of Friday's U.S. Independence Day holiday.

Against expectations of a further 350,000 decline in U.S. employment rolls, June nonfarm payrolls instead fell by 467,000 and the U.S. unemployment rate rose to a 26-year high at 9.5%, demonstrating the continuing frailty of the labor market and the economy as a whole.

From a broad financial-market perspective, the report "prompted a sizable shift in risk appetite," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon, as riskier assets such as equities and commodities were sold heavily Thursday.

As such, said Woolfolk, the dollar's rally was largely a market-positioning move and "more indicative of players taking risk off the table ahead of the long holiday weekend, than any true recovery in the greenback itself."

The exception to Thursday's strong-dollar trend was the yen, which also rallied sharply. The yen benefitted more than the dollar on the move out of risk because it is more sensitive than the dollar to equities and long-end Treasury yields, both of which came down Thursday, said Tom Fitzpatrick, a currency strategist at Citigroup in New York.

Still, Thursday's big gains by the dollar and yen did nothing to break the recent pattern of mostly sideways trading in major currency pairs, as markets continue to suffer from a lack of overall direction and increasing occasional pockets of summertime illiquidity.

"Clearly, uncertainty has been the major theme over the past couple of weeks, which has served to stop the slide in the dollar," said senior foreign-exchange trader Brendan McGrath of currency services firm Custom House in Victoria, British Columbia.

That could change on more convincing evidence of economic recovery, McGrath suggested, although the dollar can still be expected to continue finding support from bad economic news, "as investors still remain content to park their money in U.S. Treasury bonds any time there is uncertainty in the market."

Midafternoon Thursday, the euro was at $1.4025 from $1.4147 late Wednesday. The dollar was at Y95.85 from Y96.67, according to EBS. The euro was at Y134.45 from Y136.76. The U.K. pound was at $1.6402 from $1.6475, and the U.S. dollar was at CHF1.0822 from CHF1.0748.

Overnight, China's dismissal of a report that it was seeking to debate a new international reserve currency at next week's Group of Eight meeting also lent some support to the dollar. China's vice foreign minister, He Yafei, said he hadn't heard of any such request. He said he hoped the dollar will be stable because of its role as the main reserve currency.

The euro also strengthened against the Swiss franc after Swiss National Bank directorate member Thomas Jordan said the central bank was ready to intervene in currency markets.

Jordan didn't indicate what exchange rate level would trigger intervention, nor did he give details regarding the amount of money that would be involved. However, its unconfirmed currency interventions over the past few months have occurred between CHF1.50 and CHF1.52 against the euro.

Last week, the SNB bought around EUR3 billion of foreign currencies, according to traders, to curb the Swiss franc's rise.

Elsewhere, the European Central Bank as expected left its key interest rate unchanged at 1.00% and offered only scant revisions to its outlook for inflation and eurozone economic prospects.

Sweden's central bank, however, surprised markets Thursday by halving its key interest rate for the third consecutive time to a new record low of 0.25% due to the continued frailty of the Swedish economy.

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COPENHAGEN, July 2 (Reuters) - Denmark's foreign exchange reserves rose by 5.0 billion crowns to 330.3 billion ($62.59 billion) in June against economists' expectation of no change, central bank data showed on Thursday.

The central bank, whose main lending rate stands at 1.55 percent, signalled no change in interest rates. Economists also said the modest rise in forex reserves suggested there would be no change for the time being.

A Reuters survey of six economists gave a central estimate for foreign exchange reserves to remain steady at 325.3 billion crowns, unchanged from May. The numbers exclude central government foreign loan transactions.

Denmark belongs to the European Union but not the euro zone. Its long-standing policy of maintaining a stable crown against the euro means that the central bank shifts key interest rates for the sole purpose of keeping the crown around its central parity of 7.46038 per euro.

The central bank's net purchases of foreign exchange -- which includes items such as interest accrued on the reserves and changes in banks' euro-denominated deposits at the Nationalbank -- totalled 8.2 billion crowns in June, and the central government repaid 3.3 billion in foreign debt.

'In June ... Nationalbank's net purchase of foreign exchange due to intervention in the foreign exchange market amounted to 6.7 billion crowns,' the central bank said in a statement.

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Pakistan's foreign exchange reserves rose by $70 million to $11.84 billion in the week that ended on June 27, compared with $11.77 billion the previous week, a central bank spokesman said on Thursday.

The State Bank of Pakistan's reserves edged up to $8.55 billion from $8.45 billion a week earlier. Reserves held by commercial banks fell to $3.29 billion from the previous week's $3.32 billion, the spokesman said.

Foreign reserves hit a record high of $16.5 billion in October 2007 but fell steadily to $6.6 billion by November last year, largely because of a soaring import bill.

Pakistan agreed in November to an International Monetary Fund emergency loan package of $7.6 billion to avert a balance of payments crisis and shore up reserves.

The central bank said on Wednesday it had received $500 million from the Asian Development Bank (ADB) for a loan announced last week, receipt of which would be booked for the 2008/09 financial year that ended on Tuesday.

The loan amount will be reflected in data on foreign exchange reserves to be released on July 9.

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MOSCOW, July 2 (Reuters) - Russia's central bank said on Thursday it was scrapping its recommendation for commercial banks not to increase net foreign currency assets from the third quarter due to the stabilisation of the forex market.

The recommendation was issued in October 2008 just before the central bank announced a start of the gradual devaluation of the rouble. The recommendation linked banks' foreign currency position to access to the central bank's liquidity.

The central bank said the recommendation had helped to curb the demand for foreign currency at the height of the crisis. The central bank said it will continue to monitor commercial banks' net foreign currency position.

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