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TOKYO, Aug 3 (Reuters) The dollar steadied against the yen on Friday, holding above a four-month low as traders awaited a closely watched U.S. payrolls report due later in the day.

The euro held its gains against the dollar and the yen after the European Central Bank left interest rates on hold at 4 percent, but hinted at a possible rate hike in September.

A rebound in U.S. stocks on Thursday also provided some relief to investors who had been cutting risky positions such as carry trades on deepening worries over a further slump in global equity and credit markets.

Analysts said investors were returning to selling low-yielding currencies such as the yen to buy higher-yielding but risky assets, as officials pointed out that problems in the subprime mortgage market were not affecting the overall economy.

''The market still remains nervous about any sudden fall in equity markets and news related to credit problems,'' said Kengo Suzuki, a currency strategist at Shinko Securities.

The dollar was little changed at 119.14 yen from late U.S.

trade on Thursday.

Suzuki said the market is taking a breather from the recent unwinding of carry trades that had sent the yen to a four-month high against the dollar at 117.60 on Wednesday, but could resume buying yen if stock markets slide sharply.

The Nikkei share average rose 0.3 percent in early trade on Friday.

The euro was unchanged against the yen and the dollar at 163.25 yen and at $1.3704 after rising on expectations for a rate increase the previous session.

ECB President Jean-Claude Trichet said after the bank's policy meeting that ''strong vigilance'' was needed to stem inflation risks, signaling a possible September rate hike.

Federal Reserve Governor Randall Kroszner said at a nomination hearing on Thursday that fallout from the subprime mortgage troubles would likely persist for some time, but that this was not yet affecting the real U.S. economy.

Separately, the Bank of England kept interest rates steady at 5.75 percent on Thursday as expected.

Economists expect the U.S. payrolls data due at 1230 GMT to show 130,000 jobs were added outside of the farming sector in July, barely changed from 132,000 the previous month.

REUTERS SAM BST0637