* Dollar on best streak of gains since May
* Euro dips below $1.18 on reports ECB eyeing exchange rate
* Chinese services growth pushes yuan higher
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Sept 3 (Reuters) - The dollar's bounce extended
on Thursday, as investors trimmed bets against the greenback and
sold the euro on concerns that the European Central Bank was
worried about its rise.
The bounce has lifted the greenback about 1.3% above the
28-month low it hit against a basket of currencies on Tuesday.
Few analysts expect it to hold for too long, but it gained
broadly in Asia and if sustained would be the first time the
dollar has climbed three sessions in a row since May.
"You could put (the dollar bounce) down to a bit of a trend
reversal, it's had a long run downwards," said BNZ senior
markets strategist Jason Wong.
"But if it is a floor, it's only a short-term
one...everyone's pretty bearish dollars for good reason," he
said, pointing to the Federal Reserve's policy outlook that will
likely keep rates very low for a long time.
For about a fortnight now the dollar has been fighting to
hold the line after dropping 10% from a March peak. As traders
start to temper stretched bets on the euro it could post its
best week on the common currency in four months.
The euro EUR=EBS fell about 0.4% to a one-week low of
$1.1797 in Asia after the Financial Times reported that several
members of the ECB's governing council were concerned that the
euro's rise could weigh on European growth.
That followed remarks on Tuesday from ECB's chief economist
Philip Lane, who said the exchange "does matter" for monetary
policy, which had begun the euro's descent from above $1.20.
A speech from ECB board member Isabel Schnabel at 1500 GMT
will be closely watched for any comments on the currency.
"For now, do not rule out further extension towards $1.18,
but we are cautious of calling for further downside from that
level," said OCBC Bank currency strategist.
It hit a three-month trough of 88.67 pence EURGBP= .
YUAN FIRM
The outlier was the yuan CNY= , which rose as far as 6.8250
per dollar in the onshore market in the wake of a survey showing
a sustained recovery in China's services sector, which grew for
a fourth straight month. The Chinese currency pared those gains in the afternoon, to
hold steady against an otherwise rising dollar, but it has put
on an eye-catching 4.3% gain over the past three months.
That has investors beginning to think China's policymakers
are becoming more tolerant of a stronger currency as part of a
broader shift away from export-driven growth.
"Chinese leaders will be less tempted to use yuan
depreciation to stimulate growth as the export sector plays a
secondary role," said Mizuho's chief Asian FX strategist Ken
Cheung.
Elsewhere, the Japanese yen is gradually drifting back to
where it was before Shinzo Abe resigned as Prime Minister as his
close ally Yoshihide Suga firms as the favourite to succeed him.
Suga formally declared his candidacy for the Liberal
Democratic Party leadership on Wednesday and is expected to
persist aggressive fiscal and monetary stimulus. The yen slipped marginally to 106.33 per dollar. The
Australian dollar AUD=D3 slipped 0.4% to $0.7307 and the kiwi
NZD=D3 was down 0.3% at $0.6759.
Ahead on Thursday are purchasing managers index figures in
Britain, Europe and the United States and markets are also
awaiting U.S. jobs data at 1230 GMT.
U.S. payrolls figures are due Friday, with soft private jobs
data on Wednesday pointing to possible disappointment of
economists' expectations for 14 million new hires in August.
(Editing by Sam Holmes and Jacqueline Wong)