Dollar holds gains after payrolls data

TOKYO, Mar 12 (Reuters) The dollar was little changed on Monday, holding gains made against the yen last week after data showing growth in U.S. job creation eased speculation of a possible rate cut by the Federal Reserve.

U.S. payrolls were slightly lower than expected in February but an upward revision in previous months quelled some concerns of a rate cut this year, and pushed the yen further away from a three-month high hit against the dollar and the euro a week ago.

The data allayed some fears about weakness in the U.S.

economy and made investors feel more comfortable about strategies such as carry trades, in which they borrow low-yielding currencies like the yen to invest in higher-yielding currencies and assets.

''Friday's data shows that the U.S. economy is not doing as badly as some people had thought,'' said Takashi Kido, forex manager at Sumitomo Trust and Banking.

''Stocks are also recovering, which should result in more yen selling against higher-yielding currencies.'' Traders said some market participants remained cautious about selling the yen aggressively after a short-covering rally was sparked late last month, when a sharp drop in global equity markets suddenly soured investors on riskier trade strategies.

Speculative investors chopped their net short yen positions in half in the week ended Tuesday, according to data from the Commodity Futures Trading Commission, after piling on record high positions earlier in the year.

But market participants said an ongoing recovery in global shares would further boost confidence in selling the yen.

The dollar was at 118.25 yen early in Tokyo, holding on to much of its gains made on Friday, when it jumped on data showing that the U.S. economy added 97,000 jobs in February.

Last month's figure marked the smallest gain in jobs creation in two years, but jobs growth in previous months was revised higher and the unemployment rate fell, easing concerns over a sharp economic slowdown.

The yen inched up to the day's high around 118.10 yen on revised data showing Japan's economy grew 1.3 percent in October-December from the previous quarter, up slightly from a preliminary reading of 1.2 percent.

But the figure was in line with market expectations and the initial impact on the Japanese currency was limited.

The euro was also unchanged against the dollar at .3120 and 155.15 yen versus the Japanese currency.

Reuters DKS VP0622