* Yen down as traders cut long yen positions
* "Risk" trades tentatively put back on but dollar holds up
* Eyes on ECB, U.S. ADP jobs data
(Updates prices, adds comment)
By Jamie McGeever
LONDON, Dec 2 (Reuters) - The yen weakened broadly on Wednesday as traders took Japan's new monetary policy measures as a cue to sell, while mixed signals from stocks and commodities kept the dollar in check.
Receding fears over Dubai's debt problems and the prospect of U.S. interest rates staying low for some time weighed on the dollar, but talk of Asian central bank buying and the greenback's gains against the yen offered broad support.
The dollar has been widely considered the funding currency of choice in recent months as investors have sold the low-yielding unit for other currencies and assets. But the Bank of Japan's new measures put the spotlight back on the yen.
The BOJ's new measures to combat deflation and keep short-term rates down, unveiled on Tuesday, prompted investors betting on a stronger yen to square positions and take profits.
The euro was well supported ahead of the European Central Bank's policy meeting on Thursday. The bank is expected to announce details of how and when it will remove liquidity from the system, and could upgrade its growth forecasts.
"We had very strong yen appreciation (recently), and now there's some retracement. Risk appetite is a little bit stronger than it was last week when we had the Dubai news, so investors are taking profits," said Marcus Hettinger, FX strategist at Credit Suisse in Zurich.
"The BOJ didn't really do anything (major), but the risk is higher now of intervention," he said, adding the dollar could rise to 90 yen if stocks make further gains.
At 1217 GMT the dollar stood at 87.20 yen, up 0.6 percent on the day and pulling further away from a 14-year low of 84.82 yen hit last week. Traders said a break above 87.50 yen would trigger pre-placed buy orders and herald a stronger push higher.
The euro was up 0.5 percent at 131.55 yen
The single currency was near a 16-month high of $1.5145 set on trading platform EBS last week.
A senior International Monetary Fund official said on Wednesday the euro was on "the strong side" against the dollar, echoing a view expressed in an IMF report on Tuesday. [ID:nWEA4017]
The dollar index <.DXY>, a measure of its strength against a
basket of six currencies, was flat on the day at 74.39, not far
above last week's 16-month low of 74.17.
Asian stocks closed higher but European bourses and U.S.
futures were mixed. There was also some divergence in the
commodities sphere, with gold hitting new highs at $1,216.75 an
ounce
JAPAN POLICY IN FOCUS
BOJ Governor Masaaki Shirakawa met Prime Minister Yukio Hatoyama on Wednesday to discuss the economy. Afterwards he said Hatoyama did not ask him to take additional easing steps, adding that they shared the same view on deflation. [ID:nT182340]
The government has pressed the BOJ to do more to support the economy and avert the risk of another recession. The bank's emergency decision on Tuesday to provide short-term funding was seen as a way to relieve that pressure. [ID:nT374859]
Analysts at Barclays Capital said the BOJ's moves this week suggested the central bank was willing to ease policy further if needed, adding that this may limit dollar/yen losses.
"While we continue to believe that a significant move higher in USD/JPY will be led by a rise in U.S. long-term yields following the end of Fed asset purchases, the recent actions by the BOJ reduce the downside risk for USD/JPY and are likely to mark a medium-term turning point for the exchange rate," they said in a note.
Markets will be watching U.S. data on Wednesday, ahead of monthly jobs numbers due on Friday. A November employment report by Automatic Data Processing at 1315 GMT is expected to show 155,000 jobs lost in the month after 203,000 lost in October. ((Additional reporting by Naomi Tajitsu; editing by Nigel Stephenson; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net; +44 207 542 8510))