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LONDON, Aug 4 (Reuters) The dollar firmed from Thursday's one-month low on Friday as investors looked to U.S. jobs data to clarify the odds of the Federal Reserve raising interest rates for an 18th straight policy meeting next week.

As investors squared their positions ahead of the data, the euro lost some of the ground gained after the European Central Bank raised interest rates on Thursday and cemented expectations of further monetary tightening in the euro zone.

''It's just the normal uncertainty in response to the payroll numbers. But these are technical trading arguments, not the underlying trend,'' said Michael Klawitter, currency strategist at Dresdner Kleinwort.

The non-farm payrolls report at 1230 GMT is the last major piece of economic news before the U.S. central bank decides whether to continue its long series of quarter-percentage point rate rises on Aug. 8.

By 0945 GMT, the dollar was 0.3 percent firmer at 115.38 yen . Against a basket of currencies, the dollar edged up to 85.19 after Thursday's one-month low of 84.86.

The euro was 0.2 percent down on the day against the dollar at $1.2779, but up against the yen at 147.47.

Sterling hit an 8-year high of 218.28 yen and 11-week high of $1.8929, extending gains made after the Bank of England surprised markets on Thursday with a rate rise to 4.75 percent, reversing a cut made a year ago.

German June manufacturing orders unexpectedly fell 0.5 percent on the month.

RISKY PAYROLLS Economists polled by Reuters expect a 142,000 rise in July non-farm payrolls, up from June's 121,000.

More job creation or higher wage growth could increase the chance of the Fed raising rates at its Aug. 8 meeting, but Klawitter said markets had already priced in a near 50 percent chance of this, and there was limited further upside potential for the dollar.

''I'd say the odds are that the market will not revise higher the chances of a Fed rise even if payrolls come in on the high side. The scope on the upside for the dollar is limited so you would need a massive surprise,'' he said.

Analysts said a surprisingly smaller figure would harden expectations that the Fed will take no action next week and hurt the dollar.

AUSSIE CLIMBS The Australian dollar ticked higher against the U.S.

currency after the Reserve Bank of Australia lifted its forecast for underlying inflation, suggesting further upside risk for rates after this week's hike to 6 percent.

But analysts said there was limited scope for the Aussie -- which hit a 2-1/2 month high against the greenback and a 4-1/2 year peak to the New Zealand dollar -- to climb further.

''There was no sign that another rate hike was imminent and it's more likely that the RBA will rather adopt a wait and see approach,'' UBS said in a note to clients.

''The implications are that there is too much tightening priced into the curve and we see some prospects for the Australian dollar to weaken on the crosses over the next one to two weeks.'' REUTERS PKS HS1706