TOKYO, Oct 9 (Reuters) The dollar stayed near a two-month high against the yen on Tuesday as a solid employment report late last week eased concern about a possible recession in the United States, while gains in stocks warmed investor risk appetite.
The yen hovered near a 2-1/2-month trough against the Australian dollar and a 16-year low versus the Canadian dollar as Friday's surge in U.S. equities to record highs after the jobs data encouraged yen carry trades.
In yen carry trades, investors use the low-yielding yen to finance purchases of higher-yielding assets elsewhere.
Tokyo's Nikkei share average rose 0.9 per cent in early trade.
The dollar drifted sideways versus the euro as investors hesitated to buy the US currency aggressively because they were not yet fully convinced that the US economy is growing fast enough to prevent the Federal Reserve from cutting interest rates again late this month.
''Even though September jobs data was stronger than expected, that data alone did not completely wipe out the possibility of a Fed interest rate cut in October,'' said Tsutomu Soma, a senior manager of foreign securities at Okasan Securities.
At the same time, concerns that the Group of Seven nations may address dollar weakness at their upcoming meeting limited dollar selling, traders said.
The euro was little changed from late US trade on Monday at $1.4045, well below a record high of $1.4283 hit on electronic trading platform EBS last week.
The dollar index, a gauge of the greenback's value against a basket of major currencies, edged up 0.1 percent at 78.757, staying above an all-time low around 77.660 struck last week.
The dollar barely budged against the yen at 117.40 yen within a striking distance of a two-month peak of 117.61 yen reached in the previous session.
The euro was flat against the yen to 164.90 yen. The Australian dollar rose 0.3 per cent against the yen to 105.15 as gains in share prices encourage yen carry trades. The Aussie on Monday rose to 105.76 yen, the highest since late July.
The Canadian dollar traded at 119.00 yen after striking a 16-year peak around 119.50 yen the previous day.
REUTERS TB AS0707