* Oil, Australian dollar and euro edge lower
* Profit-taking sets in ahead of weekend
* WSJ says big rise in Fed bond buys unlikely at June meeting
By Masayuki Kitano
TOKYO, June 12 (Reuters) - The dollar rose against a basket of major currencies on Friday on short-covering, as investors booked profits in currencies like the Australian dollar ahead of the weekend.
The dollar regained some footing after falling the previous day, when improved U.S. labour market and retail sales data, and a solid auction of U.S. 30-year Treasury bonds gave a boost to risk appetite and dented the dollar's safe haven appeal.
"Market players are probably looking to book profits ahead of the weekend. I get the sense that this is dominating moves in currencies like the euro and the Australian dollar," said a trader for a Japanese brokerage house.
The dollar index, which measures the dollar's value against six major currencies, rose 0.2 percent to 79.703.
But it is still down on the week and has retreated from a high of 81.466 hit on Monday, which was the highest since May 20.
The dollar had rallied after last week's U.S. jobs data showed the pace of job losses slowed sharply in May and stirred talk that the Federal Reserve may raise interest rates later this year.
Many traders and economists, however, are sceptical that such a rate rise will take place, and U.S. two-year Treasury yields have backed down from seven-month highs hit earlier in the week.
The euro dipped 0.2 percent to $1.4083 and the Australian dollar eased 0.5 percent to $0.8151, having pulled back from an eight-month high of $0.8265 hit last week.
The dollar rose 0.3 percent against the yen to 97.96 yen.
The Wall Street Journal reported on its website that U.S. Federal Reserve officials are not likely to considerably increase purchases of U.S. Treasuries and mortgage-backed securities when they meet in late June.
Currency market reaction to the WSJ report was subdued.
A trader for a Japanese trust bank said the WSJ report could be viewed negatively for the dollar, if it were to refocus attention on supply worries in U.S. Treasuries.
But it may also be seen as positive for the dollar, since further increases in debt purchases by the Fed could be seen as hurting the credibility of the dollar, the trader said.
U.S. 10-year Treasuries rose 10/32 in price to yield 3.823 percent, down 4 basis points from late New York.
AUSSIE, COMMODITIES
Traders said the Australian dollar may be forming a double top on technical charts, consisting of last week's high and this week's high of $0.8238, which was hit on Thursday. Earlier, the Australian dollar drew some support from upbeat data from China.
China's industrial production rose 8.9 percent in May from a year earlier, compared with 7.3 percent in April. That beat economists' forecasts of a 7.5 percent rise but was in line with a figure reported by two Chinese newspapers earlier this week.
Traders were also focusing on trends in commodity prices like oil, which fell slightly on Friday but were not far from seven-month highs.
"From a short-term perspective, commodity prices are a focus," said Kosuke Hanao, head of treasury product sales at HSBC.
"If oil prices rise further even as an economic recovery lags behind, inflation worries could rise," he said.
Market moves in Asia were range-bound led by short-term players ahead of the weekend and a meeting of the Group of Eight (G8) leading world powers.
G8 finance ministers will meet in Italy on Friday and Saturday to assess efforts to combat the global economic crisis.
Dealers said the impact of the G8 meeting on the market is seen limited as the foreign exchange market is unlikely to be a major topic but G8 ministers are expected to discuss eventual exit strategies from crisis policies. (Additional reporting by Kaori Kaneko and Satomi Noguchi; Editing by Edwina Gibbs)