Dollar touches 2-mth high vs yen on solid US data

TOKYO, May 2 (Reuters) The dollar surged to a two-month high against the yen on Wednesday, extending gains in the wake of data that showed U.S. manufacturing expanded at its fastest pace in almost a year.

The Institute for Supply Management said its index of national factory activity rose to 54.7 in April from 50.9 in March. The reading was the highest since May 2006.

Although separate data released on Tuesday showed that pending sales of existing U.S. homes in March fell to their lowest level in four years, the upbeat manufacturing report was enough to give the dollar a boost, traders and analysts said.

''There were some buy-backs in the dollar since the market has been tilted toward short dollar positions,'' said Koji Fukaya, senior currency strategist for Deutsche Securities.

Data released on Friday showed that International Monetary Market speculators increased their net short dollar position to $23.48 billion in the week ending April 24, from around $20.95 billion the previous week, according to Reuters calculations.

The solid manufacturing data, however, wasn't enough to drastically alter market expectations for the Federal Reserve to cut interest rates later this year from 5.25 percent, Fukaya said, adding that it was hard to be upbeat about the outlook for the U.S. economy and the dollar at this stage.

Traders said gains in the dollar could be tempered by caution ahead of the release of U.S. jobs data on Friday, as well as by the fact that recent U.S. indicators have been mixed.

The dollar stood at 119.89 yen as of 0206 GMT. It earlier rose as high as 119.94 yen on electronic trading platform EBS, its highest level since Feb. 27.

The euro slipped slightly to $1.3592 having pulled back from a record high of $1.3683 hit on EBS last week.

The euro was little changed at 162.98 yen holding near an all-time high of 163.31 yen struck on EBS on Tuesday.

That euro remains the strongest of the three major currencies, bolstered by expectations for the European Central Bank to raise interest rates in June from the current 3.75 percent, and possibly to nudge them up once more by year-end.

The euro seems likely to stay on a solid footing, and even U.S.

jobs data on Friday may not be enough to bolster sentiment toward the dollar, Fukaya at Deutsche Securities said.

''The forecasts for the jobs data are pretty weak. If that's how the data turns out, it will be hard for sentiment to improve,'' Fukaya said.

The median forecast of economists polled by Reuters is for a gain of 100,000 jobs in April, well below an increase of 180,000 in March.

A tally of private payroll employment by private employment service ADP due later on Wednesday is expected to show a gain of 100,000 jobs, the same number being forecast for Friday's jobs data.

The Australian dollar nudged up shortly after the Reserve Bank of Australia kept interest rates steady at 6.25 percent on Wednesday as widely expected, but later retreated.

The Australian dollar, which hit a 17-year high of $0.8390 two weeks ago, later fell to $0.8244 down from around $0.8275 in late U.S. trading on Tuesday.

REUTERS SR BD1116