* Market focus on U.S. jobs data due at 1230 GMT
* Aussie, kiwi, sterling dip as dollar-short positions cut
* Euro, dollar and yen stable as market awaits jobs numbers
By Satomi Noguchi
TOKYO, May 8 (Reuters) - The dollar held its ground on Friday as investors shifted their focus to a jobs report for signs the U.S. labour market may be steadying, after bank stress test results removed a major uncertainty in financial markets.
The pound retreated from a four-month high and the euro fell from a one-month peak both struck the previous day as traders reduced dollar-short positions ahead of the U.S. payrolls data, while commodity-related currencies also paused for breath.
Traders said investors were looking for signs of slowing job losses to reinforce hopes that the end of a deep global recession is near, and support the improved sentiment which has buoyed stock markets and riskier currencies in the past two months.
"The dollar's direction after the payrolls data is hard to predict because better-than-expected figures may not necessarily help the dollar, and it largely depends on the stock market reaction afterward," said a senior trader at a Japanese bank.
The dollar index, a gauge for the greenback's performance against six major currencies, was steady at 83.838, recovering from a six-week low of 83.424 touched on Thursday.
Sterling edged back to $1.5010 after dipping below $1.5000, but was still below the previous day's high of $1.5198, its strongest since Jan. 9, according to Reuters data.
Some traders said sterling's early fall was exacerbated after the Telegraph newspaper reported that Britain's Financial Services Authority had begun a second round of stress tests on home loan firms.
The euro was unchanged from late U.S. trade at $1.3394, after dipping earlier as traders reduced long positions made the previous day when the euro rose to $1.3471 on trading platform EBS, its highest level since April 6.
The European Central Bank cut cut its main interest rate on Thursday and said it would spend about 60 billion euros ($80 billion) buying covered bank bonds in a bid to stem the euro zone's economic decline.
On Thursday, a drop in new U.S. jobless claims and better German manufacturing data encouraged a sense that the economic slump is bottoming out.
That followed data for April earlier this week showing private-sector employers eliminated the fewest jobs since last November and far fewer than in March.
Some analysts revised their forecasts for the number of U.S. non-farm jobs lost in April when the data comes out at 1230 GMT, with Calyon altering its estimate to 500,000 from 600,000.
The Reuters consensus forecast is for 590,000 positions lost last month, a mild improvement from 663,000 slashed in March. But the unemployment rate is seen at 8.9 percent, up from 8.5 percent the previous month..
Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong, said while a smaller drop in the number of jobs lost would support improved investor confidence, more was needed to drive forward the recent rally in riskier major currencies.
The Australian dollar, for instance, has climbed 19 percent against the greenback since early March and 32 percent against the yen since its rally ignited at the start of February. The pound has gained 8 percent on the dollar and 20 percent on the yen over a similar period.
"For the next wave of this rally to come through, you need to see more fuel on the fire and that would mean more significant improvements in data," Kotecha said.
Asia's currency market took news of the U.S. banks' stress tests results in stride. The tests showed 10 banks need additional capital -- a total of $74.6 billion -- to withstand heavier losses that would be likely if the recession worsened.
Against the yen, the dollar was firm at 99.28 yen, below a three-week high of 99.80 yen hit the previous day on EBS.
The euro edged up 0.3 percent to 133.12 yen, but was still below a three-week high of 133.58 yen on Thursday. (Additional reporting by Charlotte Cooper; Editing by Michael Watson)