FOREX-U.S jobs data supports dollar as fragile risk-on mood holds

* Signs of easing tensions drive risk rally
* Encouraging U.S. jobs data halts flight from dollar
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Westbrook
SINGAPORE, Sept 6 (Reuters) - Encouraging 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 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 money, bond and
stock markets stoked by news that China-U.S. trade talks would
resume next month, and supported the dollar. "Stronger than forecast employment, factory orders and
productivity numbers contradicted the recent 'slowing U.S.
economy' narrative," said Michael McCarthy, chief strategist at
brokerage CMC Markets in Sydney.
The dollar recouped some losses against the Australian and
New Zealand dollars AUD=D3 NZD=D3 and against a basket of
currencies clambered off a one-week low to hold flat around
98.419. .DXY
Traders now await the government's monthly payrolls report
due at 1230 GMT on Friday 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.
Other factors supporting risk sentiment were a potential
breakthrough in the Hong Kong political crisis and reduced
chances of Britain crashing out of the European Union on Oct. 31
without a deal.
The pound GBP= rose to its highest level against the
dollar in more than a month and held most of those gains to
trade around $1.2326 in Asian hours.
That was in spite of more political chaos in Britain, as
Prime Minister Boris Johnson's plan to kick off what is in
effect an election and a Brexit campaign was overshadowed on
Thursday when his younger brother quit the government.
The euro EUR=EBS was steady at $1.1031 at 0030 GMT. The
yuan CNH= gained overnight and held in morning offshore trade
around 7.1382 per dollar. The trade-exposed South Korean won
KRW= hit a month high of 1,198.40 per dollar.
Sentiment has been skittish, however, since the Brexit
project remains up in the air and previous progress on
U.S.-China trade negotiations has failed in the past.
The yen, which was sold to a one-month low of 107.22 per
dollar on Thursday, bounced a little to 106.98, a signal some
caution remains.
"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 US trade negotiation teams before which
has resulted in little in the way of progress."