The dollar earlier eased on improved risk sentiment, but investors squared positions ahead of the U.S. non-farm payrolls data — the last big event risk of the week after a round of central bank decisions which broadly weighed on the dollar.

Increased risk appetite tends to dim the allure of safe-haven and low-yielding dollar.

“The dollar caught a little bit of a bid (ahead of the payrolls figures) but the market is incredibly cautious,” said Christian Lawrence, currency analysts at RBC Capital Markets.

He said a more unpredictable market reaction was likely if the figures were lower than expectations.

“Would a worse number prompt a sell-off in equities which would boost the dollar on the view of its safe status, or would it prompt the dollar to fall because a weak number would imply the Fed staying on hold for longer,” he said.

Others said even if the numbers were slightly higher than expected, it was unlikely to boost the dollar compared with previous occasions.

“The dovish Fed statement this week has raised the bar for a positive jobs number to lead to a higher dollar,” said Lee Hardman, currency strategist at Bank of Tokyo-Mitsubishi UFJ. “Only an extremely strong number or an extremely weak number would help the dollar.”

A Reuters poll showed a median 175,000 U.S. jobs were shed in October, slower than the 263,000 lost in September, with the jobless rate rising to 9.9 percent.

By 1206 GMT, the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was flat at 75.732.

The dollar fell after the Fed kept interest rates at record lows on Wednesday and indicated they would stay there for some time.

It lost further ground on Thursday after European Central Bank President Jean-Claude Trichet sounded an optimistic note about a 2010 recovery and hinted at a slow-motion exit strategy for some emergency stimulus measures. The ECB kept rates steady as expected.

The euro was flat on the day at $1.4870, holding above key resistance around $1.486 Sterling was supported after the Bank of England on Thursday expanded its asset-purchase programme by 25 billion pounds on Thursday and suggested the scheme may be coming to an end.

The dollar was slightly weaker against the yen at 90.57 yen , with the upside capped by a large amount of options with a strike price of 91.00 yen set to expire later in the day.

Some traders said the yen may come under pressure on growing concerns about Japan sovereign risk, reflected in a blowout in the price of insuring debt.

Japan’s 5-year CDS widened to 67.2 in Europe on Thursday afternoon from 62.2 at the New York close, data from CMA DataVision showed while 10-year JGB yields hit 3-month highs on Friday.

Traders will keep an eye on Group of 20 finance ministers and central bankers who start a meeting in Scotland on Friday, although discussions on currencies are not on the formal agenda.

UK finance minister and G20 chair Alistair Darling told Reuters in an interview G20 policymakers are agreed that it is too early to pull the plug on economic life-support packages as the global recovery is still fragile.