Array

TOKYO, Oct 6 (Reuters) The dollar edged up against the yen on Friday ahead of U.S. jobs data that will give the market further insight on the economy's health and whether the Federal Reserve's next move could be to lower interest rates.

But traders said that currency moves would likely be stifled on Friday ahead of a long weekend, with Japanese markets and the U.S. bond market closed on Monday.

The euro bounced back versus the low-yielding yen a day after the European Central Bank bumped interest rates up to 3.25 percent as expected and signalled one more hike before the year is out.

''There's still demand to buy the euro versus the yen from Japanese investors,'' said Hidenori Kato, head of forex trading at Societe Generale.

''This kind of interest comes up in the market continuously,'' he said, referring to the wide rate difference between the euro and the yen, with the key rate in Japan at 0.25 percent.

ECB President Jean-Claude Trichet said after the rate announcement that the central bank would monitor inflation dangers very closely, suggesting to many in the market the ECB will likely boost rates again at its meeting in December.

The euro found further support after ECB governing council member Nout Wellink said late on Thursday that economic growth in the euro zone was ''really coming back on track'', and inflation risks in the area remain on the upside.

In early Tokyo trade, the dollar edged up to 117.80 yen The euro rose to 149.55 yen from 149.40 yen in late U.S.

trade.

Against the dollar, the single European currency was little changed at $1.2695 With the ECB meeting out of the way, the market's attention has turned to the U.S. non-farm payrolls report due at 1230 GMT and whether the figures will point to an erosion of the dollar's rate advantage over the euro and the yen.

The data are expected to show 125,000 jobs were created in September, although a weaker reading could intensify speculation that a slowing U.S. economy may lead the Fed to start cutting rates in coming months.

Some in the market said that the dollar was unlikely to get much of a boost from an upbeat jobs reading.

''Given the decidedly lower trend in employment over recent months, we believe that there is little scope for a USD increase even in the event of a small positive surprise in payroll data,'' wrote JPMorgan in a note to clients.

Reuters DKS VP0610