* Market focus on U.S. jobs data due at 1230 GMT
* Aussie, kiwi, sterling dip as dollar-short positions cut
* Euro, dollar and yen stable as market awaits jobs numbers
By Satomi Noguchi
TOKYO, May 8 (Reuters) - The dollar held its ground on Friday
as investors shifted their focus to a jobs report for signs the
U.S. labour market may be steadying, after bank stress test
results removed a major uncertainty in financial markets.
The pound retreated from a four-month high and the euro fell
from a one-month peak both struck the previous day as traders
reduced dollar-short positions ahead of the U.S. payrolls data,
while commodity-related currencies also paused for breath.
Traders said investors were looking for signs of slowing job
losses to reinforce hopes that the end of a deep global recession
is near, and support the improved sentiment which has buoyed
stock markets and riskier currencies in the past two months.
"The dollar's direction after the payrolls data is hard to
predict because better-than-expected figures may not necessarily
help the dollar, and it largely depends on the stock market
reaction afterward," said a senior trader at a Japanese bank.
The dollar index, a gauge for the greenback's performance
against six major currencies, was steady at 83.838 <.DXY>,
recovering from a six-week low of 83.424 touched on Thursday.
Sterling edged back to $1.5010 <GBP=D4> after dipping below
$1.5000, but was still below the previous day's high of $1.5198,
its strongest since Jan. 9, according to Reuters data.
Some traders said sterling's early fall was exacerbated after
the Telegraph newspaper reported that Britain's Financial
Services Authority had begun a second round of stress tests on
home loan firms.
The euro was unchanged from late U.S. trade at $1.3394
<EUR=>, after dipping earlier as traders reduced long positions
made the previous day when the euro rose to $1.3471 on trading
platform EBS, its highest level since April 6.
The European Central Bank cut cut its main interest rate on
Thursday and said it would spend about 60 billion euros ($80
billion) buying covered bank bonds in a bid to stem the euro
zone's economic decline.
On Thursday, a drop in new U.S. jobless claims and better
German manufacturing data encouraged a sense that the economic
slump is bottoming out.
That followed data for April earlier this week showing
private-sector employers eliminated the fewest jobs since last
November and far fewer than in March.
Some analysts revised their forecasts for the number of U.S.
non-farm jobs lost in April when the data comes out at 1230 GMT,
with Calyon altering its estimate to 500,000 from 600,000.
The Reuters consensus forecast is for 590,000 positions lost
last month, a mild improvement from 663,000 slashed in March. But
the unemployment rate is seen at 8.9 percent, up from 8.5 percent
the previous month.[].
Mitul Kotecha, global head of FX strategy at Calyon in Hong
Kong, said while a smaller drop in the number of jobs lost would
support improved investor confidence, more was needed to drive
forward the recent rally in riskier major currencies.
The Australian dollar, for instance, has climbed 19 percent
against the greenback since early March and 32 percent against
the yen since its rally ignited at the start of February. The
pound has gained 8 percent on the dollar and 20 percent on the
yen over a similar period.
"For the next wave of this rally to come through, you need to
see more fuel on the fire and that would mean more significant
improvements in data," Kotecha said.
Asia's currency market took news of the U.S. banks' stress
tests results in stride. The tests showed 10 banks need
additional capital -- a total of $74.6 billion -- to withstand
heavier losses that would be likely if the recession worsened.
[]
Against the yen, the dollar was firm at 99.28 yen <JPY=>,
below a three-week high of 99.80 yen hit the previous day on EBS.
The euro edged up 0.3 percent to 133.12 yen <EURJPY=R>, but
was still below a three-week high of 133.58 yen on Thursday.
(Additional reporting by Charlotte Cooper; Editing by Michael
Watson)
