Stocks, Bonds & Forex Trading
Source: uk.reuters.com

By Tamawa Desai

LONDON, Feb 6 (Reuters) - The yen fell versus the dollar and euro on Friday, reversing gains as rises in stocks renewed appetite for riskier assets but caution prevailed before U.S. jobs data which will show another grim sign for the economy.

The dollar recovered against the yen from levels seen in late U.S. trade on Thursday but was still below a nearly one-month high hit as Wall Street rallied.

But traders were wary of chasing prices sharply higher ahead of data that is expected to show more than half a million U.S. jobs likely lost in January.

The U.S. unemployment rate was likely to have climbed to 7.5 percent in January, compared with 7.2 percent a month earlier, with 525,000 jobs forecast to have been shed.

"Payrolls are the big focus for the day," said analysts at Citigroup. "Bad news still means good news for the dollar."

At 1004 GMT, the dollar was up 0.3 percent on the day at 91.46 yen after climbing above 92 yen on Thursday. The euro was at 117.20 yen .

European shares rose 0.4 percent in morning trade .FTEU3.

Data on Friday is expected to show German industrial output fell 2.5 percent in December from the previous month.

The euro was up 0.2 percent against the dollar at $1.2812 after the European Central Bank kept interest rates unchanged on Thursday but indicated more easing next month, as widely expected.

But analysts pointed out the euro will remain under pressure as the Russian rouble's decline has prompted Russian authorities to sell euros for dollars to maintain the balance of their reserves portfolio.

The rouble tested its new trading floor against a euro-dollar basket for the first time on Thursday. It was trading just above the trading floor of 41 on Friday.

The dollar was also supported on expectations for the Obama administration's bank rescue plan to be unveiled on Monday.

"The market already expects a weak jobs report, so the financial plan on Monday will be the main driver," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

Meanwhile, sterling pared some early gains after UK industrial output weakened more than expected. It was up 0.4 percent to $1.4676 , after climbing upward after the Bank of England cut interest rates on Thursday. The euro was down 0.1 percent at 87.25 pence . (Editing by Andy Bruce)