By Simon Falush

The yen fell to record lows versus the euro on Friday as the market continued to focus on the search for higher yield, while the dollar held the previous session's gains ahead of a key U.S. jobs report.


Analysts said the yen remains weak because robust risk appetite continues to encourage investors to sell the low yielding currency in carry trades to fund purchases of higher yielding assets.
Markets are looking to U.S. non-farm payrolls data due at 1230 GMT for more clues on the outlook for Fed monetary policy.
Analysts said weak data could lead to a shift in sentiment on the relatively risky carry trade which would help the yen recover.
"The carry trade continues but if the payroll numbers come in much lower than expected, this could lead to concerns about the U.S. economy, risk appetite coming off and demand returning for lower yielding currencies like the yen," said Gavin Friend, currency strategist at Commerzbank Corporates and Markets.
The dollar held onto gains against the euro and sterling, staying off 2-month and 26-year lows respectively, after U.S. service sector data on Thursday calmed talk of a possible Federal Reserve interest rate cut this year
By 1150 GMT, the euro was up 0.2 percent to 167.51 yen, just below an all-time high set earlier in the session at 167.61.
The dollar was up 0.3 percent at 123.24 yen , off last month's 4-1/2 year highs at 124.16.
The dollar was flat on the day versus the euro at $1.3595, holding most of the gains made in the previous session that took it away from 2-month lows of $1.3660 and further from April's record trough hit at $1.3682.
The greenback rose broadly in the previous session after the Institute for Supply Management's services index for June climbed to its highest level in a year, defying forecasts for a small decline.

STRONGER PAYROLLS?

A report on Thursday from private employment services company ADP Employer Services pointed to strong jobs growth, leading market participants to believe the Labor Department's jobs data at 1230 GMT will be stronger than forecast.
In a Reuters survey, economists' median forecast was for 120,000 new jobs to have been created in June compared with 157,000 jobs in May, while the unemployment rate was seen unchanged at 4.5 percent.
Sterling was steady at $2.0098 after touching $2.0207 on Wednesday, its highest level since 1981 . The Bank of England raised rates on Thursday, as expected, to 5.75 percent.
The Canadian dollar rose to its highest level this week at C$1.0516 per U.S. dollar after data showed Canada added more jobs than expected in June, backing expectations of a rate hike.
Sentiment on the Canadian dollar is also supported by oil prices going to an 11-month high above $75 a barrel.
"Strength in the oil price is benefiting oil exporters like the Canadian dollar and the Norwegian crown," said Paul Mackel, currency strategist at HSBC.
Bank of Japan Governor Toshihiko Fukui reiterated on Friday that the central bank will conduct monetary policy appropriately by closely watching economic and price conditions, offering no fresh clues on the timing of its next rate increase.
The market widely expects the BOJ to hold steady on rates at a policy meeting next week, but to raise them to a 12-year high of 0.75 percent from the current 0.50 percent in August.