TOKYO, Sept 5 (Reuters) The dollar steadied against the euro and yen on Wednesday after gaining the

TOKYO, Sept 5 (Reuters) The dollar steadied against the euro and yen on Wednesday after gaining the previous day as U.S.

August factory data eased concerns that the credit crisis was taking its toll on economic growth.

A manufacturing report from the Institute for Supply Management on Tuesday showed only a narrow slowdown in August factory activity, boosting U.S. share prices and prompting investors to buy the dollar.

But investors have since turned cautious ahead of more economic data that will give further clues on the state of the U.S. economy and the course of Federal Reserve monetary policy.

"Investors are hesitant about taking big bets ahead of important U.S. economic data including Friday's jobs report and a slew of rate decisions from central banks," said a senior trader at a Japanese brokerage.

The dollar was moving sideways from late Tuesday U.S. trade around 116.30 yen.

The euro was up 0.1 percent at $1.3620.

The market will be watching ADP employment data at 1215 GMT for its possible impact on the high-profile payrolls report due on Friday. July pending home sales and the Fed's beige book summary of the economy's performance are also due later in the session.

Weak readings in those economic reports will support expectations that the U.S. central bank will cut the fed funds rate to 5.0 percent from the current 5.25 percent.

Richmond Fed President Jeffrey Lacker told Reuters on Tuesday he would back an interest rate cut if the evidence pointed to slowing economic growth and diminished inflation, but warned that it was still too early to be sure such a move was warranted.

Against the yen, the European single currency rose 0.2 percent to 158.40 yen.

The Reserve Bank of Australia on Wednesday left interest rates unchanged at 6.50 percent, as widely expected.

The Australian dollar climbed 0.4 percent to $0.8265 and 0.3 percent to 96.10 yen.

Later in the day, the Bank of England will start a two-day rate-setting meeting at which it is widely expected to keep interest rates on hold at 5.75 percent.

The European Central Bank will hold a policy meeting on Thursday. Many economists expect the ECB to hold rates at 4.0 percent this week due to the recent turmoil in credit markets.

REUTERS PBB KP0743