* Dollar holds gains after data, central bank comments
* Outcome of ECB, BoE meetings in focus
By Aiko Hayashi
TOKYO, June 4 (Reuters) - The dollar mostly held its ground on Thursday after a big reversal from 2009 lows on comments by Asian monetary officials and weaker-than-expected U.S. data that took the wind out of a risk rally in other major currencies.
Investors had a reality check on Wednesday when data showed the vast U.S. service sector contracted for the eighth straight month in May and employers axed 532,000 private-sector jobs, undermining optimism about an economic turnaround. [ID:nN03345672]
Comments by several Asian monetary officials to Reuters that Asian central banks would keep buying Treasuries even if the rating on U.S. government debt was cut also boosted the dollar.
The greenback has come under pressure in the past few weeks partly because the market is nervous about the ability of the United States to finance its growing debt issuance. [ID:nSP412010]
The dollar rebounded more than 1 percent from 2009 lows against a basket of six currencies <.DXY> on Wednesday although the move stalled by Thursday as investors awaited policy decisions by the European Central Bank and the Bank of England.
"Asia is left picking up the pieces after a big move overnight," said a senior trader at a European bank in Hong Kong.
He said the dollar's rise was a correction to its steep losses of recent weeks rather than a change in trend. "The dollar has retraced strongly and Asia is having a day of consolidation."
The euro was flat at $1.4170 on electronic trading platform EBS
The dollar gained 0.2 percent to 96.19 yen
The ECB is expected to hold interest rates at 1 percent when it announces its decision at 1145 GMT. The market is waiting to see details of its covered bond purchase plan to keep long-term rates down and see what it projects for economic growth and inflation this year and next. [ID:nL3669427]
Sterling
The Bank of England is expected to keep its benchmark rate at 0.5 percent in its announcement at 1100 GMT. It is also seen likely to stick to its 125 billion pound ($208 billion) target for quantitative easing. [ID:nLT1012042]
RISK RALLY AND THE YEN
Losses in Wall Street shares on Wednesday added to profit-taking on the likes of the euro, sterling and the Australian dollar, which have benefited against the dollar and yen as investors have plucked up courage to shift money out of the safe-haven dollar.
"The U.S. data reminded market participants once again that the economic outlook isn't as rosy as many have been saying lately," said Hideki Amikura, deputy general manager of forex trading at Nomura Trust and Banking.
One analyst said there had been some importer demand out of Tokyo for cross/yen early in the day. The Australian dollar
Both tumbled on Wednesday, with the Aussie losing more than 2 percent against the dollar and the kiwi more than 3 percent. On Thursday the Aussie edged up 0.1 percent to $0.8007
Australia's central bank governor said there was scope to ease monetary policy further but the economy was well-placed for expansion towards the end of the year. [ID:nSYU006638]
Longer term, questions still hang over the dollar, with investors concerned about rising U.S. government debt and upward pressure on bond yields, which could feed through to mortgage lending rates and potentially stunt a recovery.
The market is expected to keep a bias for dollar selling as investor risk-appetite is gradually recovering, supported by hopes for the economic outlook, but some want to see if the time has come for a change in the dollar's trend.
"The market focus is how U.S. Treasury yields will move after Asian monetary officials' comments and the U.S. sending the Treasury secretary to China to make sure it will support Treasuries," a trader at a Japanese bank said.
"If the Treasury market calms down it would mean the elimination of one negative factor for the dollar. But on the other hand, if more evidence such as positive economic data lifts hopes for the economy, it would weigh on the dollar. So it's hard to forecast which way the dollar is heading," he said.
Federal Reserve Chairman Ben Bernanke told the House of Representatives Budget Committee that rising U.S. debt was contributing to a spike in longer-term interest rates and now was the time to start working on reining in deficits.
But he gave no clue whether the U.S. central bank would step up its purchases of government debt or mortgage-backed securities to offset rising borrowing rates, something investors have been watching for. [ID:nWEQ001068]
"In the mid to long term it's hard to deny the presence of downward pressure on the dollar because of various fallout from growing deficits in the U.S. economy," said Tsutomu Soma, a senior manager at Okasan Securities. (Additional reporting by Charlotte Cooper and Kaori Kaneko; Editing by Michael Watson)