FOREX-Yen subdued at the start of new qtr, kiwi drops

* Yen on the defensive as offshore investments to pick up

* Dlr/yen near 3-mth high ahead of Tankan survey

* Kiwi falls after IMF says it overvalued

SYDNEY, April 1 (Reuters) - The U.S. dollar held firm near three-month highs against the yen on Thursday with more gains expected as Japanese investors look for higher returns abroad now the new financial year has begun.

The New Zealand dollar fell sharply to as low as $0.7057, from above $0.7100, after the International Monetary Fund said the kiwi is currently overvalued by 10-25 percent. [nWEN2322].

The U.S. dollar inched up to 93.60 yen, from around 93.48 yen late in New York on Wednesday, with near term resistance seen around its early January high of 93.78 yen.

Traders say a daily close above 93.80 yen would be a bullish event for the dollar and could take it past 95.00 yen in the near term.

Investors were eyeing the Bank of Japan's Tankan survey for the first quarter. It will be released at 2350 GMT and is expected to show an improvement to -13, from -24. A strong number could support risk appetite and encourage more Japanese investors offshore.

Traders say sentiment towards the yen is turning bearish heading into the new quarter. Many expect a pick up in Japanese investor demand for foreign currencies, better risk appetite, expectations that U.S. Treasury yields will rise, widening rate differentials over Japanese government bonds to weigh on the yen.

"The dollar is likely to see some more gains against the yen as Japanese investors look offshore to invest in the new quarter," said Joseph Capurso, currency strategist at Commonwealth Bank.

Still, Capurso expects the U.S. dollar to stay on the defensive against other major currencies as he expected the U.S. non-farm payrolls numbers, due out of Friday, to disappoint many.

That view got a boost from data which showed private-sector employers cut 23,000 jobs this month, ADP Employer Services reported. Economists polled by Reuters had expected a gain of 40,000 jobs. For more, see [ID:nWEN2273].

Analysts are expecting the government payrolls report on Friday to show the economy added 190,000 jobs in March, albeit aided by temporary government hiring for the 2010 U.S. Census.

The dollar index <.DXY> <=USD> was down at 81.05 with the greenback hurt by the disappointing ADP numbers and quarter ending fixing flows. For the first quarter, the index rose 4 percent -- its best quarterly performance since the first quarter of 2009.

Expectations that the Federal Reserve will raise interest rates from record lows before central banks in Japan and Europe tighten monetary policy, also boosted the dollar.

The euro gained in early trade, rising to $1.3517, from $1.3510 late on Wednesday, but it remained vulnerable to sovereign risks festering in the background.

It also advanced to 126.54 yen , its highest level since February 3, having broken past resistance around 125.40 yen in the previous session.

Meanwhile, the Australian dollar slipped to $0.9160 ahead of Chinese PMI data, due around 0100 GMT. Chinese manufacturing is forecast to have rebounded as exports continue to recover while domestic investment and consumption stay strong. The PMI is forecast to have edged up to 54.5, from 52.0 in February.

China is Australia's biggest export customer, so a weak outcome may raise concerns about Chinese growth and hurt the Aussie.

Also, some expect the Aussie to face headwinds amid uncertainty on whether interest rates will rise at next week's Reserve Bank of Australia policy meeting.

(Editing by Wayne Cole)