By Tamawa Desai

LONDON, Sept 2 (Reuters) - The dollar and yen recovered
losses on Thursday as risk-taking sentiment was tempered ahead
of a European Central Bank policy meeting later in the day and
key U.S. jobs data on Friday.

Upbeat U.S. and Chinese manufacturing data on Wednesday had
lured investors away from perceived safe-haven currencies and
assets, lifting stocks, commodities and higher-yielding
currencies.

"With so much uncertainty, the market is very volatile and
moves depend on the daily data flow," said Lee Hardman, currency
economist at Bank of Tokyo-Mitsubishi UFJ. "In the longer term,
the outlook still is unfavourable for risk assets with the U.S.
economy in a soft patch."

By 0744 GMT, the dollar index, a gauge of the greenback's
performance against a basket of six major currencies, was steady
on the day at 82.557 after falling 0.8 percent on Wednesday, its
biggest one-day fall in six weeks. Support was seen at the Aug.
18 low of 81.912.

"Investors are not aggressively taking risks yet, feeling
they need to see the U.S. employment figures before deciding how
much risk they can really take," said Shuichi Kanehira, head of
FX spot trading at Mizuho Corporate Bank.

Data on Wednesday showed U.S. private employers unexpectedly
cut jobs in August, boding ill for the closely watched non-farm
payrolls report on Friday, which is expected to show a fall of
100,000 in August.

The dollar slipped against the yen, and was down 0.3 percent
to 84.12 yen, moving towards a 15-year low of 83.58 yen hit last
week.

The yen showed limited reaction to comments by Japanese
political heavyweight Ichiro Ozawa, who said action was needed
to stem rapid rises in the yen. Ozawa is pitted against Prime
Minister Naoto Kan in a party leadership race.

The euro fell 0.5 percent against the yen to 107.54 yen
after jumping 1.4 percent the previous day.

ECB AWAITED

The ECB is seen keeping its benchmark refinancing rate at
1.0 percent at Thursday's meeting. It is also expected to extend
lending support for banks despite raising its economic growth
forecasts as it seeks to balance a multi-speed recovery among
the 16 countries in the euro zone.

Traders will be watching to see whether ECB President
Jean-Claude Trichet, who is due to hold a news conference at
1230 GMT, makes a formal decision to extend liquidity to help
the banking system and whether he reiterates a cautious stance
on the economic outlook after robust second-quarter figures.

The euro fell 0.2 percent to $1.2780, down from a high of
$1.2856 the previous day.

The next target for the euro is around $1.2873 -- a 38.2
percent Fibonacci retracement of its fall from its August peak
of $1.3334 to its August low of $1.2588. The target after that
would be $1.2923, touched on Aug. 18.

French and Spanish auctions kick off the month's euro zone
bond calendar after a relative drought of supply in August.
Revised second-quarter euro zone growth data is also due out.

Sweden's central bank raised its key interest rate to 0.75
percent, as expected. The Swedish crown rose to a session high
against the euro of around 9.3100.

The Australian dollar fell 0.5 percent to $0.9066 <AUD=D4>
after data showed Australia's July trade surplus came in below
market expectations.

The Aussie hit a three-week high of $0.9117 on Wednesday on
news that the Australian economy grew at its fastest pace in
three years in the second quarter.
(Additional reporting by Rika Otsuka in Tokyo; Editing by Susan
Fenton)