LONDON  - The yen was headed for its biggest weekly gain in 16 months on Friday, helped by Japan's suspected intervention this week to pull the currency away from 34-year lows, while the dollar index fell to a three-week low ahead of U.S. jobs data.

The yen rose to a three-week high of 152.75 per dollar during Asian trade and was set to clock a weekly gain of 3.19%, its largest since January 2023. It was last 0.26% higher on the day at 153.25 per dollar.

Traders were left on tenterhooks for any further huge swings in the yen after Tokyo was suspected to have intervened to support its currency this week, on Monday and on Wednesday, to the tune of some 9.16 trillion yen ($59.8 billion), as suggested by data from Bank of Japan.

"The second round of intervention in one week, deployed after a less hawkish than expected FOMC (U.S. Federal Open Market Committee) on Wednesday, has sent markets the message that the Ministry of Finance is less tolerant of a post-intervention depreciation of the yen this time," said Francesco Pesole, currency strategist at ING, recalling the yen fall after Japan's FX intervention in September 2022.

The Fed held interest rates steady, as expected, at the conclusion of its two-day monetary policy meeting on Wednesday.

Traders are now looking to U.S. nonfarm payrolls data due later on Friday, after Federal Reserve Chair Jerome Powell told reporters that interest rates might have to remain elevated for longer but shot down talk of raising them again.

The dollar index, measuring the currency against six peers including the surging yen, edged 0.08% lower to 105.22 after hitting its lowest since April 11. It was headed for its biggest weekly fall in almost two months, down 0.8% this week.

"Today’s U.S. payrolls are a huge event for markets, as the details in the jobs report will be a key test to more optimistic bets on Fed rate cuts," Pesole added.

Elsewhere, the euro ticked 0.18% higher to$1.0740, and was eyeing a weekly gain of nearly 0.46%, its largest since March.

Sterling rose 0.15% to $1.2558 and was similarly set for its biggest weekly gain in two months, rising 0.46% this week.

(Reporting by Joice Alves, Rae Wee and Ankur Banerjee; Editing by Gareth Jones)