* Dollar slips vs basket of currencies, off 3-yr high
* Investors brace for US jobs data expected to be dire again
* Yen retreats as overseas banks buy the dollar
By Satomi Noguchi
TOKYO, March 6 (Reuters) - The dollar slipped against a basket of major currencies on Friday, retreating from a three-year peak hit this week as investors braced for data which is expected to show U.S. job losses accelerated last month.
But the dollar gained versus the yen as overseas banks bought the U.S. currency, a move traders said was driven in part by foreign investors repatriating funds out of Japanese stocks.
The yen held close to this week's four-month low near 100 yen per dollar on worries about the Japanese economy now languishing its deepest slump in more than three decades.
"Every time we see stocks falling or bank fears intensifying worldwide, it encourages global investors to repatriate funds to their own countries from other major markets," said a senior trading manager at a Japanese bank.
"This has supported a number of currencies, with the dollar gaining the most and the euro and the yen also rising -- which has made movements in the currency market rather choppy and hard to predict," he said.
The dollar index, a gauge for its performance against six major currencies, dipped 0.2 percent to 88.911, off a three-year high of 89.624 struck on Wednesday.
The greenback had risen on Thursday on its perceived safety status after Wall Street slid with the Dow and S&P falling to 12-year lows on General Motors' warning of possible bankruptcy and concerns about the banking system.
The Nikkei share average slid 3 percent, erasing gains made the previous day on hopes for bigger economic stimulus plans in China.
The euro rose 0.2 percent from late U.S. trade to $1.2569. The euro had fallen below $1.2500 on Thursday after the European Central Bank cut interest rates by a half-percentage point to a record low.
The dollar rose 0.1 percent to 98.17 yen, after falling from 99.69 yen touched on Thursday, the highest since early November.
Sterling climbed 0.3 percent to $1.4161, rebounding from a fall the previous day after the Bank of England cut interest rates to a record low and said it would start buying 75 billion pounds ($106 billion) of assets to boost the British economy.
DOLLAR'S STRENGTH
Traders are waiting to see the dollar's level in New York after the jobs report later in the day to judge if its broad strength will extend into next week.
"The market is already expecting the data to show job losses as high as 700,000, and we may see dollar buying on dips even if the currency gets hit after a weak figure," said Hideaki Inoue, chief manager of the forex trading group at Mitsubishi UFJ Trust bank.
"But if the dollar ends trading against the euro above $1.2500 it could be a sign that dollar buying will pause next week," he said.
Economists expect 648,000 jobs were lost in the United States in February after 598,000 positions were shed in January, and see the unemployment rate surging to a 25-year high of 7.9 percent from 7.6 percent the previous month.
(Additional reporting by Shinji Kitamura; Editing by Edwina Gibbs)