TOKYO, Jan 8 The yen rose on Monday, benefiting across the board from growing expectation

TOKYO, Jan 8 (Reuters) The yen rose on Monday, benefiting across the board from growing expectations that the Bank of Japan could bump up interest rates as early as next week.

The dollar steadied against other currencies, keeping gains made in the wake of a report showing surprising growth in U.S. jobs, which led the market to scale back forecasts that the Federal Reserve will cut rates in coming months.

But trade in Asia was dictated by the buying back of the yen against the euro as traders continued to unwind carry trades that had helped to push the Japanese currency to successive record lows against its European counterpart.

''Investors are trying to reduce some of the risk they are holding,'' said Sharada Selvanathan, a currency strategist at BNP Paribas in Singapore.

''There might be continued unwinding of positions in the next few days but I don't think this is going to lead to any kind of road-based unwinding of carry trades,'' she said.

The yen rose for a fourth-straight session against the Australian dollar and for a third session versus the New Zealand dollar, the highest-yielding currency among industrialised countries.

Speculation about an improvement in the yen's rate disadvantage has helped to trigger the unwinding of carry trades, which had boosted the Aussie and kiwi as investors borrowed the low-yielding yen to buy higher yielders.

''Price action on both AUDJPY and NZDJPY tells us that Japanese money is going home ahead of fiscal year end,'' said Callum Henderson, currency strategist at Standard Chartered Bank in Singapore. Japan's fiscal year ends on March 31.

By 0550 GMT, the dollar was at 118.35 yen, down from around 118.65 yen in late U.S. trade on Friday.

Trade was thinner than usual, with many dealers in Tokyo away due to a national holiday in Japan.

The dollar fared better against sterling, which edged down to a fresh six-week low around $1.9260.

The euro fell 0.2 percent to 153.90 yen, well off the record high of 158.06 struck just last week.

JOBS LIFT The single European currency was little changed at $1.3005, in sight of the six-week low around $1.2980 struck on Friday after the U.S. jobs report.

The Labor Department said the U.S. economy generated 167,000 new jobs in December, well above market expectations for a rise of 100,000.

''The numbers implied to the market that maybe the Fed doesn't have to cut as soon as they thought, so this has been very much dollar-supportive,'' said Selvanathan at BNP Paribas.

All 21 primary dealers in a poll taken after the jobs data said they expected the Fed to keep interest rates steady at the central bank's next monetary policy meeting on Jan. 30-31.

But 14 of the 21 said they see the Fed reducing rates this year as core inflation moderates and a U.S. housing slowdown impinges on economic growth.

In contrast, the yen has found favour on growing expectations that the BOJ may boost Japanese rates from the current 0.25 percent at a two-day policy meeting that starts on Jan. 17.

With no major data slated for Japan this week to provide clues about the outlook for rate differentials, traders were looking for insight from more U.S. data, including retail sales on Friday.

All data taken from Reuters calculated from the levels at 2130 GMT in the previous New York session.

Last US Close Pct YTD Pct 2006 Jan. 5 Change Change Close ------------------------------------------------------------- Euro/dlr 1.3008 1.3002 +0.05 -1.42 1.3196 Dlr/yen 118.26 118.59 -0.28 -0.63 119.01 Euro/yen 153.80 154.23 -0.28 -2.06 157.03 Dlr/swiss 1.2348 1.2360 -0.10 +1.35 1.2184 Stg/dlr 1.9305 1.9299 +0.03 -1.44 1.9588 Dlr/cad 1.1730 1.1725 +0.04 +0.69 1.1650 Aus/dlr 0.7794 0.7790 +0.05 -1.22 0.7890 Nzd/dlr 0.6857 0.6867 -0.15 -2.59 0.7039 Aus/yen 92.160 92.340 -0.19 -1.85 93.900 Nzd/yen 81.110 81.430 -0.39 -3.15 83.750 Stg/yen 228.33 228.87 -0.24 -2.12 233.28 Aus/Nzd 1.1350 1.1343 +0.06 +1.38 1.1196 REUTERS CS RAI1230