By Masayuki Kitano
SINGAPORE (Reuters) - The dollar held steady against a basket of currencies on Friday, having retreated from four-month highs on profit-taking, with the focus on whether U.S. jobs data will provide the spark for another push higher.
The dollar has erased all its 2018 losses over the past few weeks on expectations the Federal Reserve will continue to raise interest rates while other central banks, including the European Central Bank, take longer to reduce stimulus.
Additional dollar gains will likely depend on data showing a further improvement in growth and inflation, which could fan speculation that the U.S. central bank will raise interest rates this year three more times.
The dollar's index against a basket of six major currencies held steady at 92.417 (DXY). That was down from a peak of 92.834 set on Wednesday, the greenback's strongest level since late December.
The dollar index has climbed more than 0.9 percent so far this week, putting it on track for a third straight weekly gain.
The Fed held interest rates steady on Wednesday and expressed confidence that a recent quickening in inflation to near the central bank's target would be sustained, leaving it on track to raise borrowing costs in June.
Some analysts interpreted the Fed's comments on inflation as a signal it may allow price growth beyond its target, a stance that would limit the need for it to embark on a more aggressive path of tightening.
Friday's employment report for April will be evaluated for further indications of the strength of the U.S. labor market and inflation pressures.
"Any slowdown in the pace of wage growth should re-energise dollar bears," Christopher Wong, senior FX strategist for Maybank in Singapore, said in a note.
Key support for the dollar index lies at its 200-day moving average, which is now near 92, Wong added.
Non-farm payrolls probably increased by 192,000 jobs last month, according to a Reuters survey of economists. Payrolls rose by 103,000 positions in March, the smallest gain in six months, which economists dismissed as payback after unseasonably mild weather boosted hiring in February.
Average hourly earnings are expected to have risen 0.2 percent last month. That would leave the annual increase in average hourly earnings at 2.7 percent, steady from the pace recorded in March.
If the U.S. data points to solid wage growth, the dollar is likely to rise, especially against the euro, said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.
"If...wages come out a little bit stronger than expected, I think the euro tests $1.19," Innes said.
The euro held steady at $1.1987 (EUR=), staying above a near four-month low of $1.1938 set on Wednesday.
The common currency had risen 0.3 percent on Thursday, shrugging off data showing an unexpected slowdown in euro zone inflation, as the dollar's recent rally paused.
The U.S. dollar eased 0.1 percent to 109.08 yen
The Australian dollar bounced modestly as speculators took profits on long U.S. dollar positions. The Aussie rose 0.2 percent to $0.7549