UPDATE 7-Oil dips from 2-yr peak as dollar rebounds

                                
 * Dollar rebound on jobs report weighs on oil
                                
 * U.S. nonfarm payrolls rise beats forecast, supports oil
                                
 * Coming up: CFTC positions report, 3:30 p.m. EDT Fri
 (Recasts, updates prices and market activity, new byline and
changes dateline from previous LONDON)
                                
 By Robert Gibbons
                                
 NEW YORK, Nov 5 (Reuters) - Oil prices pulled back on
Friday in choppy trading as a rebound by the dollar offset
support from a stronger-than-expected U.S. jobs report.
                                
 U.S. crude oil prices reached a two-year peak above $87 a
barrel ahead of the jobs report, when the dollar was weaker as
the appeal of commodities remained boosted by this week's
Federal Reserve moves to bolster economic recovery.
                                
 The dollar rallied on the surprisingly strong U.S. nonfarm
payrolls report. The greenback had come under pressure after
the Federal Reserve on Wednesday committed to buying $600
billion in government bonds to boost a faltering recovery.
                                
 U.S. crude for December delivery <CLc1> slipped 29 cents to
$86.20 a barrel at 12:20 p.m. EDT (1620 GMT), off its $87.22
intraday peak, the highest price since $89.82 was struck
intraday on Oct. 9, 2008. Prices were still on course to post a
gain for the week of about 6 percent.
                                
 ICE December Brent crude <LCOc1> fell 42 cents to $87.58.
                                
 "Markets got a little boost from the jobs report, but the
strengthening dollar is offsetting. In addition, the markets
have been up all week and may be running into a little
profit-taking," said Tom Bentz, broker at BNP Paribas Commodity
Futures Inc in New York.
                                
 U.S. nonfarm payrolls in October posted the first increase
since May, rising 151,000 -- more than double the expected
60,000 rise. But the unemployment rate was unchanged at 9.6
percent. [ID:nN04265378]
                                
 The dollar rebounded from an 11-month low hit on Thursday
against a basket of currencies <.DXY> and the euro slipped
versus the greenback. [USD/]
                                
 U.S. stock indexes were mixed, also amid seesaw trading,
though Wall Street had recovered from a dip at the open. [.N]
                                
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For more on the Fed decision, click: [ID:nFEDAHEAD]
                                
For a PDF on what comes after the Fed decision:
                                
http://r.reuters.com/cyh73q
                                
FACTBOX on policymaker reaction to Fed: [ID:nN03131287]
                                
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 Oil prices have recovered much of the ground lost between a
July 2008 record high of $147.27 a barrel and the December 2008
low of $32.40 hit during the recession.
                                
 Oil also got a boost this week when Saudi Arabia's oil
minister Ali al-Naimi and other OPEC member officials said $90
crude oil would be tolerated by consumers. [ID:nLDE6A10FW]
                                
 Investors took the remarks as a signal OPEC would not send
more barrels into the market to dampen prices that got too far
above $80 a barrel, a change from previous indications.
                                
 The dollar's slide also had concerned producers as the
value of greenbacks received for dollar-denominated oil
diminished even as prices for other commodities bought by OPEC
producing countries, like grains, were on the rise.
                                
 A weak dollar also can lift oil prices because it attracts
investment from foreign exchange markets seeking better
returns.
                                
 JP Morgan on Thursday raised its price forecast for U.S.
crude in 2011 by more than $7 to $89.75 a barrel, and lifted by
$2 its expectations for Brent. But other analysts have noted
that oil's fundamentals have not recovered to pre-financial
crisis levels and cautioned that the rally might not be
sustainable.
                                
 "Although we are up again as of this writing in a number of
commodity markets, including energy, we have trouble seeing how
much longer the current run can extend to, given that at some
point, higher commodity prices will lead to even higher
inflation and interest rates in emerging countries," MF Global
said in a research note.
                                
 "Over the last few weeks, we have seen many Asian economies
raise rates already, and there is talk that China may be poised
to move again."
                                
 Later on Friday, investors will weigh the weekly report on
trading positions from the U.S. Commodities Futures Trading
Commission, which will have data through last Tuesday.
 (Additional reporting by Alejandro Barbajosa in Singapore and
Ikuko Kurahone and Zaida Espana in London)