July 7, 2017 / 11:25 AM / a year ago

FOREX-Dollar climbs as payrolls eyed, hits 7-week high vs yen

* Dollar on track for winning week vs yen, euro

* Investors await U.S. June jobs report later on Friday

* U.S. employers expected to have added 179,000 jobs in June

* ECB likely to move cautiously on stimulus reduction-minutes

* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh

By Jemima Kelly

LONDON, July 7 (Reuters) - The dollar climbed on Friday, hitting a seven-week high against the yen after the Bank of Japan expanded its monetary policy as other major central banks are moving in the opposite direction.

With the biggest data set-piece of the month - the U.S. non-farm payrolls report - due at 1230 GMT, the dollar edged higher across the board.

The data will be closely watched by traders for a steer on when they should expect U.S. interest rates to be hiked again. Markets are currently pricing in an almost 60 percent chance of another rate rise so far this year, after two so far.

Economists polled by Reuters expect U.S. employers to have added 179,000 jobs last month, above May’s relatively small gain of 138,000.

But BMO currency strategist Stephen Gallo, in London, said the wages and unemployment numbers would be more important for the U.S. Federal Reserve than the headline jobs figure, as they have been for a number of months.

“What the Fed is leaning on to justify normalisation policy is a pick-up in nominal wage pressure,” he said.

“Provided that the unemployment drop is being driven by good things – people in the labour force finding new work – that would silence the Fed naysayers for a while. It reduces the risk of a more dramatic selloff in the dollar short-term.”

The dollar gained over half a percent against the yen to hit 113.84, its strongest since May 16.

The BOJ said earlier on Friday it would buy an unlimited amount of bonds, as it sought to put a lid on domestic interest rates pushed higher by the broad sell-off in developed market bonds.

“(T)hey’ve said they’re going to stick to their yield target and they proved today that’s what they’ll actually do,” said Commerzbank currency strategist Esther Reichelt, in Frankfurt.

“But the market seems to be speculating increasingly that central banks will change their monetary policy to become more restrictive, and there was even some speculation that ... maybe the BOJ would also turn to this path.”

Minutes from the Fed’s June meeting released on Wednesday showed that some policymakers wanted to announce the beginning of the central bank’s reduction of its massive debt portfolio by the end of August, but others wanted to wait until later in the year.

The euro edged down 0.1 percent to $1.1409, not far from 14-month highs of $1.1445 touched last week.

European Central Bank policymakers are open to a further step towards reducing their monetary stimulus but are likely to move slowly out of fear of causing market turmoil, minutes of their last meeting showed on Thursday.

Faster economic recovery in the euro zone is giving the ECB room to pare its extraordinary stimulus measures, Bundesbank President Jens Weidmann said on Thursday.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Lisa Twaronite in Tokyo; Editing by Andrew Roche)

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