Reuters - The dollar hovered near a five-year high versus the yen on Thursday, with the focus on whether forthcoming U.S. data will support the case for the Federal Reserve to gradually scale back its bond-buying stimulus over the course of 2014.

The dollar held steady at 105.24 yen, clinging near a high of 105.41 yen set on Monday according to Thomson Reuters data, the dollar's strongest level versus the yen since October 2008.

The dollar stayed in a narrow intraday range versus the yen on Thursday, with Japanese financial markets still closed on Thursday and Friday for the New Year's break.

The greenback jumped more than 21 percent against the yen in 2013, its biggest yearly percentage gain versus the Japanese currency since 1979, according to Thomson Reuters data.

Differing outlooks for monetary policy in the United States and Japan have been key to the dollar's surge against the yen, and the start of the Fed's tapering of its stimulus could lead to further gains for the dollar in 2014.

By contrast, markets expect the Bank of Japan to maintain or even increase its massive stimulus to beat deflation.

Market participants are now focusing on U.S. economic data for clues on how quickly the Fed will scale back its monetary stimulus in coming months. The Fed said in December that it would trim its monthly asset purchases by $10 billion to a total of $75 billion per month from January.

"A focal point is whether there is going to be a reduction of $10 billion at every meeting, or whether they will wait and see for a while after announcing in December that there would be a $10 billion reduction from this month," said Teppei Ino, a Singapore-based analyst for the Bank of Tokyo-Mitsubishi UFJ.

"I think there is a significant difference between those two," he added.

Economic data on Tuesday showed that U.S. consumers' mood improved as 2013 drew to a close, with many optimistic about their future job prospects, while home prices rose again in October, though the pace of gains slowed.

Later on Thursday, the dollar could take its cues from data on U.S. weekly jobless claims and the Institute for Supply Management's index of national factory activity.

The euro rose 0.1 percent to about $1.3767, having set a two-year high of $1.3894 last Friday.

The single currency has been bolstered recently as banks in the region repatriated funds to shore up their capital bases before an Asset Quality Review by the European Central Bank.

Sterling rose to as high as $1.6592 in Thursday's Asian trading, its strongest level since August 2011. Sterling last fetched $1.6582, up 0.1 percent on the day.

The pound has been supported recently as investors positioned themselves for the possibility that the Bank of England will raise interest rates sooner than it has said it expects to.

Against the yen, sterling touched a five-year high of 174.84 yen and last fetched 174.47 yen.

The Australian dollar rose even after official Chinese data released the previous day underscored the view that the world's second-largest economy lost some momentum in late 2013. China is Australia's top export market.

The Australian dollar gained 0.4 percent to $0.8918

A separate private survey released on Thursday showed China's factory activity expanded at the slowest pace in three months in December.