* Yen climbs on expectations of global interest rate cuts
* Rate decisions by BoE, ECB, RBA, RBNZ expected this week
* Aussie drops on mounting expectations of a hefty rate cut
* U.S. jobs data also in focus
By Kaori Kaneko
TOKYO, Dec 1 (Reuters) - The yen advanced against other key currencies on Monday on expectations that central banks in major economic zones will cut interest rates this week to limit the damage from the global financial crisis.
Central banks including the Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand review interest rates this week.
The Australian dollar fell against the dollar and the yen after fresh domestic data confirmed the economy was facing a sharp downturn and bolstered chances of a hefty 100 basis point rate cut by the Australian central bank on Tuesday.
Investors refrained from building large positions ahead of these meetings but the Japanese currency looked set to hold its broad strength in case any central banks surprise with larger cuts than forecast, which would further erode the interest rate advantage of their currency against the low-yielding yen.
"The expected rate cuts will likely lead investors to sell cross/yen, which may also limit the dollar's upside against the yen," said a trader at a Japanese bank.
"But the reaction in currency markets is likely to be short-lived as other measures are needed to deal with the current economic deterioration. Monetary policy steps are not enough to help the economy," he said.
A 1.4 percent fall in Tokyo shares on recession concerns also fuelled investor risk aversion, supporting the yen against other assets.
The dollar fell 0.3 percent to 95.20 yen from late U.S. trade on Friday, while the euro fell 0.5 percent to 120.70 yen.
The European single currency also slipped 0.1 percent against the dollar to $1.2681 after falling earlier in the day to as low as $1.2620.
The Aussie slid 1.2 percent to $0.6576 after data showed Australian inflation was slowing much faster than earlier thought while manufacturing activity hit record lows in November, strengthening the case for a steep cut in interest rates this week.
Against the yen, it dropped 1 percent to 61.65 yen.
The RBA holds its monthly policy meeting on Tuesday and is considered almost certain to cut its 5.25 percent cash rate by at least 75 basis points.
EYE ON DATA AND AUTO RESCUE
Following a flurry of dismal economic data in the United States last week, investors will also be keeping an eye on a key jobs report this week that is expected to provide further evidence of deepening economic distress.
The Institute for Supply Management releases its November manufacturing index later in the day. Economists in a Reuters survey expect a reading of 37.0 from 38.9 in October.
"It will be hard for the dollar to move higher as the market has already factored in more evidence of an economic downturn," the trader said.
Market players are also keen to see whether struggling U.S. automakers win government financial support.
"Even if lawmakers approve the rescue plan, it will likely raise concerns about the financial status of the U.S. after the aggressive steps already taken, likely putting selling pressure on the dollar," said Yousuke Hosokawa, senior treasury department manager at Chuo Mitsui Trust and Banking.
Automakers are due to report on Tuesday their November U.S. sales, which are expected to have dropped by some 30 percent from a year earlier.
U.S. lawmakers are soon scheduled to reconvene to review restructuring plans submitted by the U.S. automakers and consider their request for a $25 billion rescue plan. (Additional reporting by Satomi Noguchi; Editing by Edwina Gibbs)