FOREX-Data contrast knocks dollar vs euro, yen

(Changes dateline, byline, updates prices, adds quotes)

By Toni Vorobyova

LONDON, May 16 (Reuters) - The dollar eased versus the yen and the euro on Friday, pressured by the contrast between signs of a deteriorating U.S. jobs and manufacturing picture with forecast-beating growth figures from the euro zone and Japan.

The weak U.S. data on Thursday cast a shadow of doubt on market expectations that the Federal Reserve's aggressive cycle of interest rate cuts is over. Further clues on the depth of the U.S. economic slowdown will come from April housing starts and building permits numbers at 1230 GMT and the May Reuters/University of Michigan consumer sentiment index at 1355 GMT. All three measures are seen weaker.

In contrast, Japanese data showed quarterly economic growth of 0.8 percent in the first three months of this year, above market expectations for a 0.6 percent increase [ID:nT210001].

That gave an annualised rise of 3.3 percent -- compared to just 0.6 percent in the United States in the same period.

"The Japanese GDP numbers released overnight were really, really good ... absolutely exceeding the U.S. growth in the same period," said John Hydeskov, senior FX analyst at Danske Markets in Copenhagen.

"The yen should strengthen against the U.S. dollar in the coming months ... because we still think that we are about to see some really bad business indicators out of the U.S. and more bad housing data, and also due to the fact that the Japanese economy is not looking as bad as feared by some market participants."

By 0740 GMT, the dollar was down a third of a percent at 104.34 yen <JPY=>.

The euro was 0.2 percent higher at $1.5471 <EUR=>. Against the yen, the single European currency eased a touch to 161.44 yen <EURJPY=>.

Strong first-quarter growth in Germany and France helped support the euro as the data highlighted the relative strength of the European economy compared with that of the United States.

Traders said currency moves were accentuated by thin market conditions.

"I think (the market is) so scrappy as no one wants to play," said a trader in London.

MORE BAD NEWS?

The dollar index, which tracks the greenback's performance against a basket of major currencies, fell 0.2 percent to 73.191 .DXY.  Continued...