June 3 (Bloomberg) -- The yen extended declines against the dollar and the euro in Asia after Japan's Nikkei 225 Stock Average reversed gains as crude oil futures rose.

Crude oil futures climbed as much as 1.8 percent in after- hours trading on the New York Mercantile Exchange, after dropping the most in six months yesterday. The Nikkei 225 declined 1.9 percent, reversing a gain of as much as 1 percent.

``With oil now resuming its gain, that's renewed concern on the profitability of Japanese companies, weighing on the Nikkei and the yen,'' said Shimpei Uike, who invests in overseas debt in Tokyo for Asahi Life Asset Management Co., which manages the equivalent of $10.5 billion. ``It looks like a drop in oil yesterday was a short respite for Japan.''

As of 2 p.m. in Tokyo, the yen dropped to 110.63 per dollar from 109.88 late yesterday in New York, according to EBS, an electronic foreign-exchange dealing system. It fell to 134.82 per euro from 134.21.

The dollar also strengthened against the yen and euro on speculation reports this week will show the U.S. economy is adding jobs, pushing the Federal Reserve closer to raising its key interest rate this month from a 45-year low.

Fed officials have said they want to see more job creation before the central bank increases its key rate from 1 percent.

``It is risky to sell the dollar now before the U.S. jobs data,'' said Hideyuki Tsukamoto, foreign exchange manager in Tokyo at Mizuho Bank Ltd., a unit of Japan's biggest lender by assets. ``Amid such sentiment, the Nikkei's drop accelerated the yen's decline against the dollar,'' which may reach 110.80 yen today, he said.

`Return to Normal'

First-time applications fell to 335,000 from 344,000 the week before, the Labor Department will probably report at 8:30 a.m. Washington time, according to the median of 36 forecasts in a Bloomberg News survey.

U.S. companies added 225,000 workers to their payrolls last month, the department will probably say Friday, fueled by an economy that's grown at the fastest pace since 1984, according to the median of 72 forecasts in a Bloomberg News survey. The projected increase would bring to almost 850,000 the number of jobs created since March, the best three-month period since the year 2000.

Against the euro, the dollar climbed to $1.2189 from $1.2216.

The U.S. currency has rebounded 6.2 percent against the euro from its record low of $1.2930 reached on Feb. 18 on prospects the U.S. economy is accelerating and the recovery of the jobs market will prompt the Fed to raise interest rates as early as June.

Fed Chairman Alan Greenspan said in a letter dated May 14 to Senator Paul Sarbanes, a Maryland Democrat, that today's low interest rates ``must be returned to a more neutral setting at some point.''

The Fed's key interest rate is at 1 percent, half that offered by the European Central Bank. The ECB will probably keep its interest rate at 2 percent today, all 27 economists surveyed by Bloomberg News said. The bank will announce its rate decision at 1:45 p.m. in Frankfurt, followed by a press conference by ECB President Jean-Claude Trichet 45 minutes later.

To contact the reporter on this story: Taizo Hirose in Tokyo at Hirose2@bloomberg.net

Last Updated: June 3, 2004 01:03 EDT