* Dollar/yen rises as high as 94.78 on EBS before easing
* US service sector, housing activity better than forecast
* Canadian dollar nears parity with U.S. dollar
* Markets closely watch moves in Chinese yuan (Updates prices, adds comment, details, changes byline)

NEW YORK, April 5 (Reuters) - The dollar retreated from a seven-month high against the yen on Monday as investors booked profits following four days of gains for the U.S. currency. Higher oil and metals prices helped propel the Canadian dollar to a 20-month high against its U.S. counterpart, leaving it within striking distance of parity, while the euro slipped. A holiday-thinned market kept trading volume light, with the UK, most euro zone countries and parts of Asia closed.

The dollar hit a seven-month peak near 95 yen overnight. U.S. data showing the economy's vast services sector grew last month at its fastest pace since mid-2006 added to the optimism sparked by Friday's payrolls report, which showed employers added jobs in March at the fastest clip in three years.

A rise above 4 percent in the 10-year U.S. Treasury yield for the first since June also helped the dollar by making dollar-denominated Treasuries more attractive than comparable lower-yielding Japanese government bonds.

But traders said investors used the greenback's spike as an opportunity to buy back the yen, locking in profits after four days of dollar gains.

We've had such a strong ascent lately, and today's the day people have decided to take some profits, said Andrew Wilkinson, senior analyst at Interactive Brokers in Greenwich, Connecticut.

He said signs of strong global growth and higher U.S. yields will help the dollar resume its rise against the yen in the days ahead, with a move above 100 yen likely this quarter.

The dollar last changed hands at 94.14 yen, down 0.5 percent, after earlier hitting 94.78 yen, a seven-month high. The euro fell 0.5 percent to 127.11 yen EURJPY= but was down 0.1 percent against the dollar at $1.3495.

Other traders said the dollar is likely to find new resistance around 95.10 yen -- which would be a 61.8 percent retracement of its fall from a high in April 2009 of 101.45 to a 14-year low of 84.82 yen hit in late November.

Technically dollar/yen is clearly in a bullish trend, said Minoru Shioiri, chief manager of foreign exchange trading at Mitsubishi UFJ Securities. But for many players the dollar looks too high to bet more on the currency.

CANADIAN PARITY, CHINA IN FOCUS

Sterling rose 0.5 percent to $1.5288 while the U.S. dollar fell 1 percent to 1.0010 Canadian dollars, a 20-month low.

The last time the Canadian dollar neared parity with the greenback, Canadian policymakers worried it would hurt the economy by making its exports more expensive.

Wilkinson said the economic backdrop has since changed.

Canada is growing at a very brisk place, and the central bank knows it will soon have to act on interest rates to curb price pressures, he said. So from that perspective, there's no point complaining about a stronger currency.

Market players said they were also watching moves in the Chinese yuan after U.S. Treasury Secretary Timothy Geithner said on Saturday he will delay an April 15 report on whether China manipulates its currency. Chinese President Hu Jintao is scheduled to visit Washington next week for a nuclear security summit. [ID:nN03183056]

There was a slight increase in market expectations for the currency to appreciate in yuan non-deliverable forwards CNYNDFOR=. One-year NDFs moved from 6.645 per dollar to around 6.6200, which implied an appreciation of about 3.1 percent in a year's time. (Additional reporting by Wanfeng Zhou; Editing by Padraic Cassidy)