* Dlr likely to make moderate gains in Asia
* Talk of Fed rate hike emerges
* U.S. short-term interest rate futures in focus
TOKYO, June 8 (Reuters) - The dollar edged higher against a basket of currencies on Monday, building on its largest one-day gain in more than five months made after data showed the pace of U.S. job losses slowed sharply in May.
The smaller-than-expected job losses has sparked concerns that the Federal Reserve may lift interest rates sooner than previously thought, prompting investors to reduce their dollar short-positions, dealers said.
"The U.S. jobs data spurred investors to cut dollar-short positions that had been built up and this is likely to continue in Asian trade today," said Akira Takeuchi, manager at Chuo Mitsui Trust and Banking.
"But it would be too early to say the market's bias is dollar positive. The currency market is focusing on U.S. short-term interest rates as talk of a rate increase by the Federal Reserve has emerged," he said.
The Labor Department said on Friday that U.S. employers cut 345,000 jobs in May, the fewest since September and far less than economists had forecast. They cut 504,000 jobs in April. But the jobless rate raced to 9.4 percent, the highest since July 1983, from 8.9 percent in April.
Talk of the potential for an interest rate hike sooner than previously thought pushed U.S. Treasury debt prices lower on Friday while short-term interest rate futures, which track market expectations on the Federal Reserve's rate policy, advanced.
The dollar index, a gauge of the greenback's value against a basket of six currencies, was up 0.2 percent to 80.797.
The dollar index rose 1.6 percent on Friday, its best performance since Dec. 19, according to Reuters data. It rose 1.8 percent on the week, its largest weekly rise since April 12.
The euro was down 0.1 percent at $1.3949 after falling as low as $1.3925 on trading platform EBS, the lowest in one week.
Against the yen, the euro was steady at 137.77 yen.
The dollar rose 0.1 percent to 98.80 yen after hitting a one-month high at 98.90 yen on EBS on Friday.
Sterling fell 0.3 percent to $1.5945 as political uncertainties in UK continued to weigh.
British Prime Minister Gordon Brown sought to fend off a challenge to his authority on Friday, reshuffling his cabinet to secure the loyalty of several ministers and averting a government collapse. (Reporting by Kaori Kaneko; Editing by Edwina Gibbs)