FOREX-Dollar mixed ahead of January U.S. jobs report

(Updates prices, adds comments, byline)

By Kevin Plumberg

NEW YORK, Jan 31 (Reuters) - The dollar fell against the yen but rose against the euro on Thursday, with dealers focused primarily on cutting back on risky trades a day ahead of the closely watched January U.S. employment report.

On Wednesday, the U.S. Federal Reserve cut its benchmark interest rate by a half-percentage point, for a total reduction of 1.25 percentage points in a little more than a week.

But the near-term direction for the dollar was unclear, with fears growing that the credit crisis that began in the United States is now growing overseas.

"We're primarily trading off of risk aversion and the view that the credit crisis may be spreading, so that's causing carry trades to unwind and putting pressure on European currencies," said Michael Malpede, senior currency strategist with Man Global Research in Chicago.

"There's the perception that the Fed is getting ahead of the curve on the economy and Europeans may be lagging a bit. ... We may be getting to the bottom of our crisis and they may be just about to confront theirs," he said.

Carry trades, in which investors borrow in a low-yielding currency such as the yen to buy higher-yielding ones, were the most dominant strategy in the currency market until last summer when a crisis in the U.S. subprime mortgage market erupted.

The dollar was down 0.4 percent from late Wednesday to 105.95 yen JPY=. The euro fell 0.7 percent to 157.30 yen EURJPY=, which helped push the euro down 0.2 percent to $1.4845 EUR=, according to Reuters data.