* Dollar flat as traders square up ahead of US payrolls, G7
* High-yielding FX, stocks pressured by economic jitters
* Global rebalancing, reserves flows cap dollar gains
(Recasts, adds comment and quote, updates prices, changes byline and dateline. Previous TOKYO)
By Jamie McGeever
LONDON, Oct 2 (Reuters) - The dollar was flat against a basket of major currencies on Friday as dealers squared positions ahead of U.S. jobs data later in the day and a meeting of Group of Seven finance chiefs over the weekend.
The dollar benefited from weakness in global equity markets after soft U.S. economic data renewed fears over the global recovery, triggering profit-taking in higher-yielding currencies and risk reduction across the asset spectrum.
This meant investors bought back the dollars they had used to fund purchases of other currencies and assets in recent weeks, strengthening the U.S. currency's safety bid in times of market uncertainty and diminishing appetite for risk.
But its gains were limited by falling U.S. bond yields and expectations the G7 would repeat its call to rebalance the world economy, a process which will likely involve a weaker dollar and currency appreciation across much of Asia and emerging markets.
First up, however, is the latest U.S. employment report at 1230 GMT, the economic indicator that has probably the single biggest impact on financial markets, encouraging traders to trim positions on the day.
"For today, it's all about being square, not being too aggressive on positioning," said Roberto Mialich, FX strategist at Unicredit in Milan, adding that the dollar would "perversely" benefit from falling U.S. stocks and weak jobs data.
A median forecast of economists polled by Reuters suggests 180,000 jobs were lost last month, down from 216,000 job losses in October.
At 0735 GMT the dollar index, a measure of the dollar's value against six major currencies, was unchanged on the day at 77.25.
The euro was flat on the day at $1.4530, having fallen to a three-week low of $1.4502 earlier.
G7 MEETING
Dealers reported good demand from Asian reserve managers in the low $1.45s and stronger support at $1.4450, a break of which on the upside in early September was key and so could be equally significant if it gives way on the downside.
Traders also reported options expiries at $1.4550 rolling off later on Friday.
The dollar was down 0.2 percent against the yen at 89.40 yen , within sight of an eight-month low of 88.23 yen struck on EBS on Monday.
Some attributed the yen's rise against the dollar to a domestic media report that Japan's finance minister reiterated he would not discuss the yen's recent rise versus the greenback at the G7 meeting in Istanbul.
A fall in the yield on benchmark 10-year U.S. Treasuries to a four-month low of 3.15 percent also hurt the dollar against the yen.
The greenback, however, gained around 0.5 percent against the Australian, Canadian and New Zealand dollars as equity market weakness hit the so-called "commodity currencies". European stocks were last down 1.4 percent and U.S. futures pointed to a lower open on Wall Street.
The euro remained under some pressure ahead of G7, after the European Union's Economic and Monetary Affairs Commissioner Joaquin Almunia said on Thursday the single currency's recent gains would be raised at the meetings.
Federal Reserve Chairman Ben Bernanke said on Thursday the dollar would weaken if it lost its status as the international reserve currency. He added that he did not see this as a near-term risk, so long as the United States took steps to manage its fiscal problems.
U.S. Treasury Secretary Timothy Geithner said a strong dollar was very important to the United States.
"In the absence of the major global reserve managers (at G7), comments that the dollar should be strong carry little impact," said Barclays Capital FX strategists in a note.
"The big short-term threat would be the Europeans saying that they view euro strength as a threat to the recovery, or if they resuscitated the 'brutal' world with respect to the euro's recent strength," they said.