FOREX-Dollar hits 6-week peak versus yen on Fed view; sterling tumbles

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Firm ADP report raises bets for strong US jobs data on Friday

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Sterling slumps as BoE chief suggests quicker rate cuts

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Euro sags as ECB hawk Schnabel takes dovish tone on inflation

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Yen under pressure as new Japan PM says too soon for rate hikes

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Traders focus on economy in absence of Middle East escalation

(Updates prices as of 0540 GMT)

By Kevin Buckland

TOKYO, Oct 3 (Reuters) - The dollar scaled a more than six-week high versus the yen on Thursday as robustness in the U.S. jobs market reinforced bets the Federal Reserve will not rush to cut interest rates.

Sterling tumbled to a two-week trough after Bank of England Governor Andrew Bailey said in an interview with the Guardian newspaper that the central bank could become "a bit more activist" on rate cuts if there was further good news on inflation.

The euro slid to a three-week trough after normally hawkish European Central Bank policymaker Isabel Schnabel took a dovish tone on inflation, cementing bets for a rate cut this month.

The yen has come under selling pressure since Japan's new prime minister said on Wednesday, following a meeting with the central bank governor, that the country is not ready for additional rate hikes.

The safe-haven U.S. currency saw additional demand as tensions simmered in the Middle East following Iran's ballistic missile attack on Israel, which spurred a vow of revenge.

The dollar index, which measures the currency against the euro, yen and four other top rivals, added 0.22% to 101.88 as of 0540 GMT, a three-week peak.

The ADP's private payrolls report on Wednesday showed a larger-than-expected 143,000 increase in U.S. jobs last month, raising expectations for a strong non-farm payrolls reading on Friday that could be critical for dictating the pace of Fed easing.

Currently, traders lay 37.1% odds of another 50 basis-point U.S. rate cut on Nov. 7, according to the CME Group's FedWatch Tool, after the Fed kicked off its easing cycle with a super-sized reduction last month. That's down from 49.3% a week ago, but still seems too high, according to Ray Attrill, head of FX strategy at National Australia Bank.

Although the ADP report is often a poor predictor of the non-farm payrolls number, Wednesday's data "does reduce the odds of an outsized downside miss on payrolls," Attrill said.

"I do think that if the payrolls report overall is not too shabby tomorrow night, then we will see that pricing (for a 50 basis-point cut) coming in quite significantly."

The dollar added 0.14% to 146.66 yen after earlier reaching 147.25 for the first time since Aug. 20.

Dovish Bank of Japan policy maker Asahi Noguchi, who dissented against the rate hike in July, said the central bank must be patient in normalising policy in a speech in Nagasaki.

On Wednesday, Japanese Prime Minister Shigeru Ishiba completed his backflip from perceived monetary hawk to dove, saying: "I do not believe that we are in an environment that would require us to raise interest rates further."

After taking the top job on Tuesday, Ishiba immediately called a snap general election for Oct. 27, four days ahead of the BOJ's next policy decision.

The new premier has also rolled back previously expressed support for higher corporate and capital gains taxes.

Mizuho Securities strategist Shoki Omori said Ishiba's extremely frank comments on monetary policy made for a "quite surprising moment," and led to a barrage of calls from clients that stretched through the Tokyo night until morning.

"The simplest interpretation is that it is an election strategy," aimed at boosting the stock market ahead of the ballot, Omori said, summarizing the views of the investors he spoke to.

"Short-term, long USD/JPY seems to be the consensus."

Sterling plunged 0.61% to $1.31845, and earlier dipped to $1.31695 for the first time since Sept. 19.

The BoE's Bailey has grown more dovish in recent weeks, saying last month he was "optimistic" that inflation pressures would ease sufficiently for the central bank to cut rates further. In August, he said further rate cuts would not be rushed because it was still too soon to be sure inflation was beaten.

The euro eased 0.16% to $1.1027, and earlier reached $1.1025 for the first time since Sept. 12.

The ECB's Schnabel said euro zone inflation was increasingly likely to ease back to the central bank's 2% target, dropping her long-standing warning about the difficulty of taming prices.

Traders now lay 93.4% odds for a quarter-point rate cut on Oct. 17, and are even pricing a small chance of a 50 basis point reduction, according to LSEG data.

The Australian dollar slid 0.35% to $0.6862, while the New Zealand dollar dropped 0.44% to $0.6235.

Risk-sensitive currencies have come under pressure in the wake of Iran's offensive, amid jitters over the scale of any Israeli retaliation and the potential to spur an all-out war.

Israeli media said the cabinet had decided on a "harsh" response, but had yet to finalise details.

"Markets are inherently bad at trying to price tail risk," said National Australia Bank's Attrill.

"Those events are things that markets deal with as and when" they happen, he said. "Markets are aware of it, but they're sticking to their knitting I think, which is focusing on economic fundamentals."

(Reporting by Kevin Buckland; Editing by Jamie Freed)