* Euro up as ECB hints at slow-motion exit strategy
* BofA news triggers risk appetite, pushes dollar down
* Yen pulls further away from 14-year highs vs dollar (Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 3 (Reuters) - The euro firmed against the U.S. dollar on Thursday after comments from the European Central Bank suggested that it would gradually withdraw emergency liquidity from the system.
The yen, on the other hand, fell broadly for a second straight session, as worries persisted Japan may move to weaken its currency. Yen weakness pushed the euro to its strongest performance versus the Japanese currency in about three weeks.
Though the ECB at a meeting left interest rates at record lows, President Jean-Claude Trichet said the next 12-month refinancing operation for banks would be the last. The bank also lifted its economic growth forecast for 2010. For more see [ID:nECBNEWS].
The euro neared a 16-month high around $1.5140 and rose against the yen, but it gave up some gains when Trichet said plans to wind down some emergency programs were not a signal that interest rates are about to change. [ID:nGEE5B125T]
"The euro was up on the day but it failed to get over $1.5150. Although Trichet did say something about an exit strategy, there was no indication that the refi rate will go up any time soon," said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York.
Ultra-loose monetary policy tends to erode a currency's value because it increases money supply and risks inflation.
"I don't think there was enough in Trichet's comments to push the euro to a new high. That said, our bias is still to sell the dollar in the coming sessions."
In late afternoon trading, the euro rose 0.2 percent to
$1.5072
Analysts said Trichet had to walk a fine line as any hint of a rate rise would prompt traders to bid up the euro, especially as the U.S. Federal Reserve has said it would keep its own rates low for an extended time.
BOOST FROM BANK OF AMERICA
The euro got a modest boost when Bank of America
But some of the euro's gains came off after data showing that the vast U.S. services sector contracted in November. For details, click on [ID:nN03409987].
The yen, meanwhile, was under pressure after the Bank of Japan said this week it would provide new three-month funding to banks to combat deflation. Top Japanese officials also warned that the yen had grown too strong, further prompting selling of the currency.
The dollar was up 0.9 percent at 88.21 yen
BoJ Governor Masaaki Shirakawa said the central bank does not target foreign exchange for monetary policy but "if the bank's easy stance becomes widely known in markets, it will have certain effects on the currency market in the long run."
Sterling fell 0.4 percent to $1.6560
Also on Thursday, U.S. Treasury Secretary Timothy Geithner reiterated the importance of a strong dollar and said the United States must persuade the world it will be more fiscally responsible. [ID:nN0388759]
Traders are now focusing on Friday's non-farm payrolls report for November. Analysts expect job losses of 130,000, down from 190,000 cuts in October.
"The bar is set high for the non-farm payrolls report as the market expects the smallest amount of job losses in 25 months," said Kathy Lien, director of FX research at GFT. She added that seven out of the 10 indicators for payrolls suggest a positive report. (Additional reporting by Steven C. Johnson; Editing by Kenneth Barry) ((gertrude.chavez@thomsonreuters.com; +1 646 223 6322; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))