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* Dollar steadies after drop, index down about 0.8 pct for week
* Dollar at 116.10 yen, euro close to $1.06, third week of gains
* Sterling fades after 2 up days, peso holds intervention gains
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Jan 6 (Reuters) - The dollar clawed back ground on Friday but was heading for a second straight weekly loss, having tumbled the previous day on a rare piece of poor U.S. data and apparent action by Chinese authorities to shore up the yuan.
Most currencies were range trading ahead of U.S. non-farm payrolls due at 1330 GMT (8:30 a.m. ET) and the dollar was drifting, up 0.6 at 116.05 yen having also nudged the euro down to $1.0590.
Sterling slipped after two days of gains and ahead of a decision in the next week or two on parliament's role in Brexit negotiations, while Mexico's peso steadied having been boosted by a $1 billion currency intervention on Thursday.
"It's a bit quieter following the moves yesterday and going into the payrolls it will take a fairly strong print especially on the earnings side to reinvigorate the stalled dollar rally," said Credit Agricole head of G10 FX strategy Valentin Marinov.
"My hunch is that investors are just waiting for the Trump inauguration," which is on Jan. 20.
A Reuters poll on Friday showed that the dollar is expected to keep strengthening against the euro in the months ahead with even chances of reaching parity this year.
President-elect Trump is already giving plenty of hints about his likely plans once he take office, however. In his latest Twitter outburst he criticized reports that U.S. taxpayers would pay for his planned border wall with Mexico.
"The dishonest media does not report than any money spent on building the Great Wall (for sake of speed), will be paid back by Mexico later!" Trump said.
The bigger focus for traders though was the upcoming non-farm payrolls, expected to have increased by 178,000 jobs last month after a similar rise in November, according to a Reuters survey of economists.
The U.S. unemployment rate, though, is forecast to tick up to 4.7 percent from a nine-year low of 4.6 percent in November.
The dollar index, which measures the greenback against six of the world's top currencies, was at up 0.1 percent at 101.68 having set a 14-year high of 103.820 three days ago on a seeming resumption of the dollar-bullish 'Trump trade'.
It crumpled on Thursday though following lacklustre U.S. employment data and having been buffeted by a surge in the Chinese yuan as Beijing made moves to shake out large bets against its currency.
There was more action in Beijing overnight as borrowing rates for the offshore yuan or CNH jumped to 61 percent, their highest in a year, and the CNH headed for its biggest weekly gains since it was introduced in 2010.
Most G10 currencies, from the Canadian dollar to the Swiss franc and Scandinavian Swedish and Norwegian crowns dipped meanwhile as the U.S. dollar added 0.2-0.3 percent against them.
The Aussie and Kiwi dollars managed to hold their own at $0.7338 and $0.7019. Both though had briefly hit three-week highs overnight after Australia posted its first trade surplus in almost three years in November.
"The global economy looks to be in better shape compared to a year ago so the (current) risk-off trend could be limited," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.
"But China-related headlines appear to have given participants a chance to adjust positions which had excessively favoured the dollar."
For Reuters new Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
Reporting by Marc Jones; Editing by John Stonestreet and Andrew Heavens