* Yen climbs towards 11-week highs vs dollar and euro
* U.S. services sector expands a bit faster -ISM
* U.S. Jan private job growth slightly short of forecast -ADP
* Market focus turns to ECB policy meeting Thursday
By Richard Leong
NEW YORK, Feb 5 (Reuters) - The yen rose on Wednesday towards recent two-month highs against the dollar and euro as stock markets struggled on nagging worries about emerging markets and global economic growth, forcing investors to seek safe-haven currencies.
The dollar held steady against the euro as traders awaited the outcome of Thursday's European Central Bank policy meeting and whether policy-makers would consider further stimulus to help a still fragile euro zone economy.
Safe-haven demand for the yen was supported by a slightly below-forecast 175,000 gain in U.S. private job growth in January reported by ADP. This mildly weaker-than-expected labor indicator raised concerns the government's January payroll report might be weaker than expected, which in turn could add selling pressure on the dollar and stocks.
The latest ADP figure was "a mild disappointment, but it's not a big enough of a surprise to move the currency market," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York.
The yen's gain against the dollar was limited by an encouraging report showing the U.S. services sector expanded faster than forecast in January.
The dollar briefly pared much of its losses against the yen on the ISM services report after falling as much as 0.85 percent in response to the ADP data. The greenback was last 0.3 percent lower to 101.39 yen.
The euro was down 0.2 percent to 137.06 yen after hitting a session low 136.51 yen.
Both the dollar and euro fell to 11-week lows against the yen on Tuesday, when the dollar hit 100.755 yen and the euro fell as low as 136.25 yen.
The dollar traded in a choppy range against other major currencies. The dollar index was last down 0.04 percent at 81.097 as it bounced from 80.898 and 81.240.
Reflecting investors' nervousness, implied volatility in the dollar/yen and the euro/yen pairs - a gauge of how sharp swings will be in the currency market - remained elevated. One-week dollar/yen implied vols were trading at 11.4 percent, up from around 8 percent a week ago.
Wall Street stocks resumed their recent selloff with the Standard & Poor's 500 index last down 0.2 percent, extending to its year-to-date decline to 5.0 percent.
EYES ON ECB
Against the dollar, the euro was slightly lower at $1.3515 , holding above a two-month low around $1.3477 set on Monday amid caution that the European Central Bank could sound more dovish at Thursday's policy review.
With inflation well below the ECB's target and the risk of deflation seeping into the euro zone, the central bank is under pressure to loosen policy. But there is also a chance the ECB may hold off, which could see the euro bounce.
Wednesday's weak retail sales in the euro zone in December, and weaker-than-expected final composite PMI reading stoked expectations the ECB policymakers might adopt a bond purchase program similar to one the Fed has implemented in an effort to avert a downward price spiral that could cripple the economy for years.
"Everyone is looking to see whether the ECB will change its policy," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
While the 18-nation block has stabilized its financial system after containing its weaker members' debt woes, it has struggled to move back on a sustained growth path.
"The ECB prefers to keep its powder dry until conditions deteriorate further. Policymakers might be buying time for the euro zone to stumble into a recovery," Schlossberg said.
- USA News