FOREX-Dollar steadies as risk-on mood holds ahead of U.S. jobs data

* Signs of easing tensions drive risk rally
* Asia trade quiet as U.S. payrolls data awaited
* Dollar flat, Asian currencies inch higher
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Westbrook
SINGAPORE, Sept 6 (Reuters) - Upbeat U.S. economic data gave
the dollar an edge over its peers on Friday, arresting a recent
flight from the greenback while also supporting Asian currencies
as investors toned down their recent gloom over the global
economy.
Separate surveys suggested the world's largest economy is in
better shape than investors had feared. U.S. service sector
activity accelerated in August and private employers boosted
hiring beyond expectations. It contributed to a broad risk-on shift in currency, bond
and stock markets stoked by news that China-U.S. trade talks
would resume next month. The data kept the dollar steady against most major
currencies while investors waited for a monthly payrolls report
due at 1230 GMT for the next snapshot on the labour market's
health.
"Investors are now hoping they can take this week's
positivity over the finishing line, so fingers crossed the
August U.S. payroll report...doesn't throw a damp towel on the
proceedings," said Stephen Innes, Asia Pacific Market
Strategist at AxiTrader.
The optimism of the past few days bolstered the South Korean
won KRW= and Australian and New Zealand dollars
AUD=D3 NZD=D3 , setting them on course for their sharpest
weekly gains since June, each adding more than a percentage
point against the dollar.
The pound GBP= has had its best week since May, adding
almost 1.4% on the dollar as parliament appeared to pull Britain
back from the brink of a no-deal exit from the European Union by
voting to delay leaving.
Sterling was flat at $1.2328 by 0628 GMT on Friday. Asian
currencies drifted slightly higher.
The Australian dollar held close to a month-high struck on
Thursday at $0.6817. The won touched a month-high of 1,198.40
per dollar, then retreated a little.
Against a basket of currencies the dollar .DXY was flat at
98.387. The euro EUR=EBS was steady at $1.1040 at 0628 GMT
The safe-haven yen, which was sold to a one-month low of
107.22 per dollar on Thursday, bounced a little to 106.99, a
sign of some caution creeping in.
Meanwhile, the U.S. non-farm payroll report due later on
Friday is expected to show an increase of 158,000 and the
unemployment rate holding steady at 3.7%. A miss could shatter
already fragile sentiment.
Other factors supporting the market's risk appetite are
already wavering. Hong Kong leader Carrie Lam's withdrawal of
the extradition bill that sparked the city's summer of protests
does not seem to have appeased demonstrators. Ratings agency Fitch downgraded Hong Kong's credit rating on
Friday, citing the continued unrest. In Britain, Prime Minister Boris Johnson's plan to kick off
what is in effect an election and a Brexit campaign was
immediately overshadowed on Thursday when his younger brother
quit the government. China's yuan CNH= was mostly flat, though on track for its
first weekly gain in three weeks.
"These moves may prove to be short term rather than the
start of a fresh cycle," said Nick Twidale, director of
Sydney-based brokerage XChainge.
"Both the major geo-political issues that seem to have
turned over the last few days have a large degree of uncertainty
associated with them over the medium, let alone long term," he
said, referring to Brexit and U.S.-China trade talks.
"We've seen a lot of activity on the frequent flyer accounts
of both the Chinese and U.S. trade negotiation teams before,
which has resulted in little in the way of progress."

(Editing by Sam Holmes and Jacqueline Wong)