FOREX-Yen benefits as other major c.banks prepare rate cuts

* Yen climbs on expectations of global interest rate cuts

* Expected BoE, ECB, RBA, RBNZ rate cuts this week weigh

* U.S. jobs data also in focus

(Recasts, adds quotes and comment, updates prices, changes byline and dateline. Previous: TOKYO)

By Jamie McGeever

LONDON, Dec 1 (Reuters) - The Japanese yen strengthened on Monday and currencies of countries where central banks are expected to slash interest rates later this week, such as the euro, sterling and Australian dollar, all weakened.

The Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand are all expected to cut rates by at least half a percentage point, diminishing the yield advantage of their currencies over the ultra-low yielding yen.

Analysts expect these four major central banks will cut rates aggressively to counter the threat of deflation and prevent the global financial market crisis from spilling over into further economic weakness.

The yen also garnered some support from broad weakness in world stock markets on the first trading day of the month, while crude oil's slide of 4 percent after OPEC deferred a supply cut helped support the Japanese unit and U.S. dollar, analysts said.

"Currencies where rates are heading down toward zero should continue to suffer, and those that are already close to zero should continue to benefit," said Neil Jones, head of hedge fund sales at Mizuho.

The Bank of Japan, meanwhile, whose key interest rates are a mere 0.3 percent, said it will hold an emergency meeting on Tuesday to discuss changes in the use of corporate debt for collateral banks put up to access central bank funds.

At 0850 GMT the dollar was down 0.7 percent against the yen at 94.75 yen and the euro was down 1.1 percent against the Japanese unit at 119.85 yen .

The euro was also down 0.4 percent against the dollar at $1.2641 , and sterling was off 1.3 percent against the greenback at $1.5191 .

RATES FOCUS

The Aussie slid around 2 percent to $0.6424 and the "kiwi" was off almost 3 percent at $0.5340 .

Analysts expect the RBA to cut its benchmark cash rate by 75 basis points to 4.50 percent on Tuesday. But data on Monday showing Australian inflation slowing much faster than earlier thought and manufacturing activity at record lows in November bolstered the case for a steeper cut in rates. [ID:nSYD363959]

The RBNZ is expected to lop a full 1.5 percentage points off its key rate to 5 percent, which would match the magnitude of the Bank of England's surprise cut last month.

Economists polled by Reuters expect the BoE to follow that up with a more modest 50 basis point cut to 2.5 percent on Thursday, but futures traders are pricing in a more aggressive 100 basis point reduction.

The ECB is expected to cut by half a percentage point on Thursday to 2.75 percent but the weakness of recent economic and inflation indicators is building the pressure for a deeper cut.

The euro zone manufacturing sector, for example, contracted sharply in November, data showed on Monday. [ECON]

"Polls show economists are expecting the ECB to cut by 50 basis points but marketwise, there would be disappointment if the ECB did 50 basis points," said Steve Barrow, head of currency strategy at Standard Bank in London.

Global equity markets failed to get a lift from growing rate cut expectations. Having ended November on a high, leading Asian and European bourses opened December on the back foot, many of them shedding more than 1 percent on Monday.

Neither did a near 4 percent fall in oil back down toward $52 a barrel CLc1 following OPEC's meeting in Cairo at the weekend support equities. [ID:nLT557953]

Financial markets in the United States should return to normal liquidity and trading conditions on Monday following last week's Thanksgiving holiday.

Investors will be keeping an eye on the November jobs report on Friday. Later on Monday the Institute for Supply Management releases its November manufacturing index. [ECONUS]

Market players are also keen to see whether struggling U.S. automakers win government financial support.U.S. lawmakers are soon scheduled to reconvene to review restructuring plans submitted by the U.S. automakers and consider their request for a $25 billion rescue plan. [ID:nN28297232] (Reporting by Jamie McGeever and Swaha Pattanaik; editing by Mike Peacock and Andy Bruce)

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