* Yen down broadly as risk tolerance reduces safety bid
* Euro pares gains after ECB offers no sign of exit
* U.S. jobless data highlights fragility in labor markets
* Investors await U.S. nonfarm payrolls report Friday (Recasts, adds comment, updates prices, changes byline)
By Nick Olivari
NEW YORK, Sept 3 (Reuters) - The yen fell from a seven-week high against the dollar and declined versus other major currencies on Thursday as an upbeat tone in global stock markets reduced the Japanese currency's safe-haven allure.
The euro erased most gains against the dollar after the European Central Bank offered no signs of an exit from its unconventional measures aimed at stimulating the economy and signaled that interest rates will remain low for some time. For more, see [ID:nL3374378].
Shares on Wall Street edged higher <.SPX> as investors focused on strength in sales by key retailers, and a 4.8 percent rally in the Shanghai Composite Index <.SSEC> reassured investors that China can support a global economic recovery and raised appetite for risky assets.
"We've seen the strong performance overnight in the Chinese stock exchange. Some positive sentiment spilled over into European and North American trading," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
"There's clearly a risk appetite bias, but ... I think ahead of tomorrow's (nonfarm payrolls) numbers, it's unlikely to become a strong trend," he added.
The ECB earlier held interest rates at a record low 1.0 percent as widely expected and warned that now was not the time to withdraw state support as economies emerge slowly from recession. There are increasing signs of stabilization in the euro area economy, but uncertainty remains high, ECB President Jean-Claude Trichet said.
"Given the recent upside surprises to euro zone economic data, the market appeared to be somewhat positioned for a more hawkish tone from the ECB president," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.
"On balance, his comments are cautious with regard to the economic outlook and that's dampening some of the euro's previous upbeat tone."
In mid afternoon New York trading, The dollar rose 0.3 percent to 92.48 yen
The euro was little changed at $1.4268
The yen also fell against other major rivals, with the euro up 0.3 percent
PAYROLLS AWAITED
The euro also came under pressure after the ECB's Trichet confirmed the European central bank would offer banks unlimited 12-month funds at a flat rate of 1.0 percent, offering no sign of easing up on unconventional measures. [ID:nECBNEWS].
Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida, said the ECB had foiled hopes it would make the longer-term refi rate more flexible as a way out of its easing policy.
"I think some people were thinking that this could pave the way for rates to firm going forward. Obviously, that has been dashed," said Simpson.
Markets were becoming somewhat wary of taking on too much risk as policymakers have indicated a cautious stance on the economic outlook. Investors were also reluctant to place big positions ahead of a key U.S. jobs report on Friday.
Economists polled by Reuters are looking for job losses of
225,000 for August.
U.S. data on Thursday showed new applications for jobless benefits fell last week, but the prior period's figure was revised up, highlighting the fragility of the labor market. Separately, the Institute for Supply Management said its non-manufacturing index climbed to 48.4 in August, the highest in 11 months. [ID:nN0391201]
"We've seen jobless claims come down markedly from their peak a few months ago, but they seem to have stalled around the upper (500,000) handle, I think that certainly implies continued softness in the jobs market, which undermines hopes for a rapid recovery," Travelex's Esiner said. (Additional reporting by Wanfeng Zhou and Gertrude Chavez-Dreyfuss; Editing by Leslie Adler)