* Dollar flat as traders square up ahead of US payrolls, G7
* Media report on ECB supports euro
* September payrolls due at 1230 GMT, -180K print expected
(Adds comment and quote, updates prices)
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 euro briefly rose on a Market News report citing "well-placed monetary sources" that the European Central Bank was discussing raising interest rates and withdrawing its liquidity provisions, even though it won't be for some time.
Trading ranges were narrow before the U.S. employment report for September at 1230 GMT. Median forecasts in a Reuters poll show 180,000 jobs were lost, down from 216,000 in August.
Analysts played down the significance of the Market News report, saying that traders were taking it too literally.
"While it's prudent for central banks to discuss the possibility of raising rates at some point, (it is) less prudent for any of the big three central banks -- the U.S., UK and euro zone -- to move any time in the coming six months," said Lauren Rosborough, senior currency strategist at Westpac in London.
Traders were also reluctant to take on big bets ahead of the G7 in Istanbul this weekend, where finance chiefs will likely reiterate their call to address global trade and investment flow imbalances, a process which could weaken the dollar over time.
The euro edged up to the day's high of $1.4565 before pulling back to trade flat on the day at $1.4540 by 1022 GMT. In earlier trade, it had hit a three-week low of $1.4502.
Dealers reported good demand from Asian reserve managers in the low $1.45s and stronger support at $1.4450. Traders also cited options expiries at $1.4550 rolling off later on Friday.
The euro pared losses against the yen to trade flat at 130.00 yen. It was up 0.5 percent against sterling at 91.60 pence.
The dollar slipped 0.2 percent to 89.40 yen, within sight of an eight-month low of 88.23 yen hit on EBS on Monday.
The U.S. currency was supported against high-yielding "commodity" currencies including the Australian, Canadian and New Zealand dollars, which took a hit from a 1.3 percent slide in European shares.
CURRENCY TALK AT G7?
The dollar index, a measure of the dollar's value against six major currencies, was unchanged on the day at 77.20.
The dollar benefited from weakness in global equity and commodity markets after soft U.S. employment and manufacturing data this week renewed global recovery concerns, triggering profit-taking in these assets and higher-yielding currencies.
Markets braced for the September non-farm payrolls report. Analysts said there was a possibility of a low reading, with some pointing to a print as weak as -250,000.
"Part of the pessimism (about risk demand) is likely related to today's US employment report, following weak labour market indicators in recent days, including the ADP employment report, initial jobless claims and the ISM manufacturing employment," analysts at Barclays said in a research note.
Some in the market say the dollar may benefit from a weak report as it would fuel more risk aversion, while boosting the U.S. currency's safe-haven appeal.
The euro's rise was capped due to speculation that its appreciation may be discussed at G7, after European finance officials this week suggested such a possibility.
European officials have increased their rhetoric against euro strength. French Finance Minister Christine Lagarde on Friday said "everybody" needed a strong dollar, and that she hoped dollar-friendly comments from U.S. Treasury Secretary Tim Geithner this week would be heard.