* Dollar underpinned by worries over global recovery
* Yen rises across the board as Nikkei slides 1.5 pct
* July 8-10 G8 meeting eyed for FX diversification debate
* Investors shrug off North Korean missile launches
By Rika Otsuka
TOKYO, July 6 (Reuters) - The dollar held its ground against
a basket of currencies on Monday, supported after a weak U.S.
employment report last week raised doubts about a quick economic
recovery and as China played down chances of changes in the
dollar's reserve status.
The yen rose broadly as a fall in Tokyo shares prompted
Japanese investors to trim long positions in currencies from
countries with higher interest rates and from emerging markets.
But activity was subdued in Asian trade, with major currency
pairs remaining in ranges as market participants awaited fresh
factors such as more economic indicators and U.S. corporate
earnings announcements for the second quarter.
Investor confidence has taken a knock since last week's
non-farm payrolls report cast doubt over the strength and speed
of a U.S. turnaround, and currencies expected to benefit first
from global recovery, such as the Australian dollar, have fallen.
"Since the U.S. jobs data last week the market seems to be
back to the unwinding of the recovery trade," said Tohru Sasaki,
chief foreign exchange strategist for Japan at JP Morgan Chase.
The dollar index, which tracks the greenback's performance
against a basket of six major currencies, was barely changed from
Friday at 80.370 <.DXY>.
The euro was at $1.3978 <EUR=>, slipping from $1.4000 in late
European trade on Friday. U.S. financial markets were shut on
Friday due to the Independence Day holiday.
The dollar slipped against the yen to 95.45 yen <JPY=> from
96.00 yen as Japanese investors averted risks by cutting bets on
other major currencies.
Traders said they expected dollar support at 94.88 yen, a low
hit on June 23, as the Bank of Japan's latest survey of Japanese
companies showed the exchange rate that big manufacturers were
using in their plans for the financial year to next March
averaged 94.85 yen, lower than 97.18 previously.
A fall in the dollar below 94.85 could further stoke concerns
over Japanese exporters' profits overseas, sparking more Tokyo
share selling, they said.
The Nikkei share average <> was down 1.5 percent.
CHINA REASSURES
One dealer said investors had not yet decided their currency
strategies for the second half of the year and a key factor would
be whether shares resumed a rally begun about four months ago.
The euro fell to 133.47 yen <EURJPY=R> from 134.30 yen in
late London trade on Friday, while the Australian dollar dipped
to 75.42 yen <AUDJPY=R> before edging back to 75.88.
"Demand for the safer dollar and the yen is returning as
investors are wondering whether there are any economies besides
China that are strong enough to lead a global recovery," said Jun
Kato, senior chief analyst at the Shinkin Central Bank Research
Institute.
The market is also focused on the Group of Eight (G8) meeting
on July 8-10 for any further debate on currency diversification.
China, which has floated the idea of looking for an
alternative to the dollar as a global reserve currency, said the
greenback would retain its global dominance for years to come,
playing down the likelihood of any change in the current
situation. []
North Korea launched ballistic missiles on Saturday, South
Korea's defence ministry said, in an act of defiance towards the
United States on its Independence Day. []
But the market showed a muted reaction as few market players
believed it would lead to an actual military attack on other
countries.
(Additional reporting by Charlotte Cooper; Editing by Michael
Watson)
