* Dlr holds gains after strong U.S. private sector jobs data
* Traders focus on euro digital expiry at $1.3125
* U.S. payrolls on Friday to set dollar's direction
(Releads, adds quotes, changes dateline prvs TOKYO)
By Tamawa Desai
LONDON, Jan 6 (Reuters) - The dollar steadied on Thursday after a surge in the previous session, with investors reluctant to chase the currency higher ahead of Friday's non-farm payroll numbers.
A string of robust U.S. data have driven the dollar higher on expectations that the world's largest economy would recovery faster than other major economies.
The ADP jobs report on Wednesday showed a record 297,000 private-sector jobs were created in December and U.S. factory and services sectors' data this week also buoyed the greenback.
"There have been positive developments for the U.S. economy pointing to a more sustained recovery, whereas investors remain concerned about developments in the UK and Europe," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
"The market expects a significantly strong figure for Friday's payrolls, but they could be overestimating. So there is scope for disappointment," he added.
The ADP report drove a 1.5 percent gain against the yen for the dollar, its biggest one-day rise in more than three months, although dollar-selling by Japanese exporters tempered gains. By 0817 GMT, it was down 0.2 percent on the day at 83.05 yen.
The euro eased 0.2 percent to $1.3123. Traders focused on a digital option at $1.3125 worth some 15-20 million euros which was set to expire at 1500 GMT, which may constrain trade.
They also cited trendline support at $1.3110, with another possible downside target lurking at $1.3080, the euro's 200-day moving average.
DOLLAR STRENGTH
Payrolls on Friday are expected to show overall gains of 175,000 jobs for December -- up from 140,000 prior to the ADP data.
Some traders said it could be difficult for the dollar to extend its surge if the figure came close to expectations.
"A number around 200,000 would likely spur profit-taking. A positive surprise of 250,000-300,000 is needed to spur the dollar higher," one London-based trader said.
The dollar index, which measures the greenback's value against a basket of major currencies, was steady at 80.287 , a sharp turnaround from last week's 78.775 trough.
"Everybody is happy for now to hop on the bus, which seems headed toward dollar strength," said Kimihiko Tomita, head of foreign exchange at State Street Global Markets in Tokyo.
The Australian dollar traded below parity and fell 0.1 percent to $0.9985.
Worries about widespread floods in the Australian state of Queensland, which produces two-fifths of the world's coking coal, provided another excuse to take profits on the Aussie, traders said. (Additional reporting by Kaori Kaneko in Tokyo)