* Dollar firm near 3-week high vs yen as Nikkei rises
* Stock rally overshadows tension in Middle East
* Firmer gold, oil prices briefly push up Aussie
* Traders await U.S. jobs data on Friday for dollar direction
By Satomi Noguchi
TOKYO, Jan 5 (Reuters) - The dollar held firm near a three-week high against the yen on Monday as risk appetite picked up after Tokyo shares followed Wall Street higher on hopes for a recovery in the U.S. economy later in the year.
In choppy trade, the Australian dollar briefly touched a three-month high against its U.S. counterpart and two-month peaks versus the yen on firmer gold and oil prices.
The Nikkei share average rose 2 percent on Tokyo's first day of stock trading in 2009, after U.S. stocks surged late last week as investors discounted gloomy economic data including a sharp contraction in factory activity.
Traders said the dollar was getting support on hopes that U.S. President-elect Barack Obama will unveil a fresh economic stimulus package aimed at creating 3 million jobs and resuscitating economic growth.
But the recovery against the yen looked fragile, and the greenback may not find clear direction until the U.S. jobs report due later this week which could revive worries about the economy, traders said.
"The market has become inured to bad economic news after having seen so much since late last year," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
"Market players are still waiting to see if the dollar resumes its slide after the U.S. jobs data or if it will maintain its strength on hopes for U.S. President-elect Obama," said Shioiri.
Traders said risk appetite would likely continue to recover if an expected U.S. economic stimulus plan contains substantial measures to help the economy that do not disappoint the market.
The dollar rose 0.3 percent from late New York trade on Friday to 91.99 yen, near the 92.41 yen struck late last week on trading platform EBS, its highest since mid-December.
The dollar plunged to near 87 yen in volatile trade last month, its lowest in more than 13 years, as the financial crisis prompted investors to flee from riskier assets.
The euro dropped 0.2 percent to $1.3889, giving up an earlier rebound to near $1.3960 as short-term traders dropped euro-long positions built after the currency's fall halted at $1.3840 last week with strong bids, market players said. The euro slipped 0.1 percent to 127.69 yen.
AUSSIE GAINS GROUND
Strong regional stock gains after the U.S. stock rise helped higher-yielding currencies like the Australian dollar.
Firmer commodities gave the Aussie a brief lift. Gold rose 1 percent as tension in the Middle East sparked safe-haven buying, while crude oil surged more than 3 percent on Monday. Australia is a big exporter of commodities.
The Aussie briefly climbed to around $0.7160 according to the Reuters dealing system, its highest point since mid-October, before sliding back to $0.7132 as the dollar recovered versus the euro.
Against the yen, the Australian currency was up 0.3 percent at 65.60 yen after touching a two-month peak of 65.93 yen.
The Aussie hit a 12-year high against sterling, rising to 0.4934 pounds ahead of a widely expected rate cut by the Bank of England later this week.
The BoE is expected to follow December's 100 basis point rate cut with at least another 50 basis point reduction at its two-day policy meeting starting on Wednesday amid growing signs the economic downturn is gathering pace.
Markets are pricing in an 80 percent chance that the BoE will slice borrowing costs to 1.25 percent from the current 2 percent, taking the key rate to its lowest since the BoE was founded in 1694.
If expectations increase that the BoE will slash rates further after this week's meeting, sterling is expected to hit parity against the euro in the near term, a trader at a Japanese bank said.
The euro hit a record high against sterling of 98.05 pence in December, according to the Reuters dealing system. (Additional reporting by Kaori Kaneko; Editing by Chris Gallagher)