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* U.S. dollar helped by trade data
* Canadian dollar at lowest in almost 4 years
* Focus on U.S. jobs data on Friday
By Laurence Fletcher
LONDON, Jan 8 (Reuters) - The dollar rose against the yen on Wednesday as upbeat U.S. trade data the previous day triggered renewed appetite for riskier assets among global investors.
The Canadian dollar, against which hedge funds have been betting, dropped versus the U.S. currency after activity by purchasing managers nosedived unexpectedly in December.
The U.S. dollar rose 0.5 percent to 105.07 yen, pulling further away from Monday's two-week low of 103.88 and back towards last week's five-year high of 105.45 yen. One trader cited options expiring at 105 yen, which could help pin the Japanese currency at these levels.
The dollar index hit a one-month high of 80.954 and was last up 0.1 percent on the day at 80.943.
Data on Tuesday showing the smallest U.S. trade deficit in four years, as exports hit a record high, lifted the dollar. At the same time, global stocks rose, indicating the greater risk appetite that is usually a sign to sell the yen.
However, investors were looking to Friday's U.S. jobs report, and to minutes from the Federal Reserve's December meeting later on Wednesday, for clues to how quickly the U.S central bank will cut back on its huge bond-buying programme.
"The market is still residual bullish dollar/yen but it's still shy of its highs (last week)," said Ian Gunner, portfolio manager at Altana Hard Currency Fund.
"People who are sceptical of this move will think it's entirely consistent with a topping out process (where the currency fails to break through a previous high and falls)."
Investors dumped the Canadian dollar after Tuesday's PMI data and a bigger-than-forecast trade deficit.
That lifted the U.S. dollar to C$1.0825 <CAD=D4, its highest since May 2010. It was last up 0.5 percent at C$1.0816.
Comments by Bank of Canada chief Stephen Poloz that it should keep its key interest rate on hold until data persuaded it otherwise also weighed on the currency.
U.S. jobs data on Friday is expected to show the world's biggest economy created 196,000 jobs in December, according to analysts polled by Reuters.
Fed officials have been careful to play down the possibility of accelerated stimulus tapering. Boston Fed President Eric Rosengren and San Francisco Fed President John Williams said on Tuesday they expected the U.S. central bank to reduce stimulus at a steady pace.
Altana's Gunner added, "A lot depends on what payrolls numbers say on Friday. People will be wary of being sucked in (before then)."
The dollar pared earlier losses against the euro, with the single currency down 0.1 percent at $1.3604.
The European Central Bank meets on Thursday and is likely to do no more than warn of its readiness to act despite another surprise fall in euro zone inflation.