* Euro resumes declines ahead of U.S. payrolls report
* Yen slips vs dollar as political uncertainty weighs
(Corrects four year low for euro to $1.2110, not $1.2210 in paragraph 7)
NEW YORK, June 3 (Reuters) - The U.S. dollar rose broadly on Thursday as investors debated the outlook for the U.S. labor market a day ahead of the government's key non-farm payrolls report and became increasingly risk averse.
The euro, and to some extent the dollar, gained early on bullish bets for a strong reading of U.S. payrolls data but later bearish investors bought dollars on risk aversion in case expectations for jobs growth are too high.
The euro touched a session low against the U.S. dollar and Swiss franc due to technical trading and position adjustment ahead of U.S. payrolls, dealers said.
The yen fell for a second day versus the dollar due to political uncertainty in Japan.
"There is a bit of concern about the jobs number with the bar being set high," said Kathy Lien, director of currency research at GFT in New York. "There is a strong chance the non-farm payrolls number could fall short of expectations."
A weekly government reading on U.S. jobless claims and a monthly report on private-sector jobs released on Thursday showed signs of support for the U.S. economy. That prompted analysts to upgrade forecasts for monthly payrolls data.
In late afternoon trading in New York, the euro was last
down 0.7 percent at $1.2160, near the session low of $1.2153
A Reuters poll gave a consensus forecast U.S. payrolls data would show 513,000 jobs created in May. [ID:nN02176933]
Some economists are anticipating an even stronger figure, with BNP Paribas upgrading its forecast to an increase of 615,000. U.S. President Barack Obama added to optimism, saying on Wednesday the report would show strong growth. [ID:nN02175839]
The number of U.S. workers filing new applications for unemployment insurance fell as expected last week, according to government data. U.S. private employers added 55,000 jobs in May, according to a private report. For details, see [ID:nEAP102300] and [ID:nN02211844]
"These reports show the labor market is in fact stabilizing," said John Doyle, senior currency strategist at Tempus Consulting, Washington. "Fundamentals here are much stronger than they are across the pond, so that means interest rates should go up here first."
But given such lofty expectations for the Friday report, analysts said caution would be required going into the data given the heavy bullish positioning.
A sell-off in euro/Swiss franc came simultaneous with the drop in euro/dollar. Traders said markets took out weak stops in euro/dollar at $1.2220 and below 1.4100 in euro/swiss.
They added that option expiries in the single currency between $1.2300 and $1.2200 at 10 a.m. EDT (1400 GMT) may have helped push the euro lower across the board.
The single currency was last down 0.6 percent against the
Swiss franc at 1.4064
THE YEN
The dollar was up 0.4 percent versus the yen
The dollar's two-day advance against the yen was the best two-day move since May 10 at current prices.
Also, with the market speculating Japan's next prime minister would take a tougher stance in fighting the yen's strength, traders took this as an opportunity to trim long positions in the currency.
Finance minister and candidate for ruling party head -- and the premiership -- Naoto Kan surprised markets earlier this year by saying he wanted the yen to weaken more and that most businesses were in favor of a dollar/yen rate around 95 yen. (Additional reporting by Steven C. Johnson, Gertrude Chavez-Dreyfuss in New York and Neal Armstrong in London) (Reporting by Nick Olivari and Vivianne Rodrigues)