* Greenback on track for best week since November
* Easing Mideast tensions hammer yen
* U.S. payrolls data eyed at 1330 GMT
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Westbrook
SINGAPORE, Jan 10 (Reuters) - The dollar looked set to post
its best week in two months on Friday, buoyed by easing Middle
East tensions and upbeat U.S. economic data.
The greenback is 1.3% firmer on the yen for the week so far,
and up 0.6% against a basket of currencies .DXY .
The prospect of war in the Middle East ebbed on Wednesday as
the United States and Iran backed away from further
confrontation following a U.S. drone strike that killed a top
Iranian military commander, and an Iranian attack on U.S. forces
in Iraq in response.
The yields on U.S. government debt are now above where they
were before the Jan. 3 drone strike that sparked fears of a
broader conflagration. Higher bond yields support currency
prices by attracting capital flows.
Meanwhile there has been a slew of strong economic signals,
with data showing a pick-up in the U.S. service sector, falling
joblessness claims and solid private hiring.
"There's nothing fundamental to drive people out of the U.S.
dollar at this stage," said National Australia Bank's head of FX
strategy, Ray Attrill.
Moves in Asian morning trade were slight.
The dollar was steady at $1.1105 per euro EUR= and $1.3066
per pound GBP= . Against the yen it held at 109.53 yen per
dollar JPY= , near a two-week high hit overnight. It sat near a
three-week high on the New Zealand dollar NZD=D3 at $0.6611.
Its next move will likely be determined by December
job-market data due at 1330 GMT. The consensus forecast is for
164,000 extra jobs in December, following a bumper 266,000 added
in November.
"(It) is not a huge amount of jobs compared with November,
so if we do see something in line with the previous, then we
could see a big rally in the U.S. dollar," said Ashley Glover,
Head of Sales Trading for Asia Pacific at brokerage CMC Markets
in Sydney. "While the downside could be greatly heightened, with
such a small number as the consensus."
Alongside the yen, the Australian dollar has been among the
week's worst performers, shedding 1.1% against the greenback as
investors begin to bet that bushfires raking the continent could
dent the economy and drive interest rate cuts.
The Aussie touched a three-week low of $0.6850 on Friday
AUD=D3 , before being buoyed higher to $0.6863 by
better-than-expected retail sales figures. Futures pricing implies a roughly 40% chance the Reserve
Bank of Australia will cut rates when it meets on Feb. 4, up
from about a one-third chance priced in late last year. 0#YIB
An outlier this week has been the Chinese yuan, which has
climbed to a five-month high, despite the geopolitical
turbulence, on growing optimism as the Jan. 15 date for signing
the Sino-U.S. trade deal nears.
Offshore yuan CNH= last traded at 6.9261 per dollar.
(Editing by Jacqueline Wong)