Dollar stronger vs yen before U.S. jobs data

TOKYO, March 9 (Reuters) The dollar edged up on Friday, backing off a three-month low against the yen hit earlier in the week as investors shifted funds back into riskier assets even while awaiting U.S. jobs data for clues on the interest rate outlook.

The yen only briefly ticked higher after data showed a surprisingly big 3.9 percent rise in Japanese machinery orders in January from the previous month, suggesting capital spending is helping underpin the economy's expansion.

The dollar and major currencies have bounced back strongly against the yen in the past few days as global stock markets have recovered from a sell-off and made investors comfortable about rebuilding short positions in the Japanese currency.

Traders said a further recovery in shares would likely put more pressure on the yen. In early trade, the Nikkei share average gained 0.8 percent, a day after surging 2 percent.

Currency strategists at JPMorgan Chase said markets may react more strongly to a positive U.S. payrolls report than a weak one given the sharp pull-back in risky positions that has already unfolded.

''We believe markets would react relatively more to good news, given how much negative sentiment is already priced in,'' they said in a note to clients.

The dollar inched up to 117.22 yen climbing back towards the high of 117.49 yen in the previous session, and up sharply from the three-month low of 115.16 yen hit on Monday.

The euro edged up slightly to 153.94 yen from near 153.85 yen in late New York trade, up from a three-month low near 150.75 yen.

The single currency was little changed near .3135 The euro dipped on Thursday after the European Central Bank lifted rates to a five-year high of 3.75 percent as widely expected, but ECB President Jean-Claude Trichet left investors uncertain about how much further rates may rise.

A weeklong rush to cut positions in risky assets unleashed a sharp unwind in carry trades that sent the yen soaring last week for its biggest weekly rise against the euro since August 2003.

The low-yielding yen has been widely used as a source of cheap funds to buy higher-yielding currencies and assets in the risky carry trade, a position that suffers when financial market volatility spikes higher.

But the U.S. currency has suffered against other counterparts as investors look for the Fed to begin cutting interest rates as soon as mid-year to help shore up a slowing economy.

The February employment data will help show whether softer economic growth is making companies more cautious about hiring.

In a Reuters poll, economists expect 100,000 jobs were created last month compared with 111,000 in January.

REUTERS DKS PM0627