* Dollar looks to potentially upbeat US jobs report to resume rise
* Dollar nudged off 16-mth high by bullish pound
* Slight ebb in trade tensions supports Aussie, yuan
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh (Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, Nov 2 (Reuters) - The dollar steadied on Friday ahead of the closely watched U.S. jobs report, after pulling back from 16-month highs in the previous session as investors cautiously moved back into riskier assets.
The dollar index against a basket of six major currencies was little changed at 96.375 after dropping nearly 0.9 percent overnight, weighed down by a rallying sterling.
Sentiment was also buoyed by news of a phone call between U.S. President Donald Trump and Chinese President Xi Jinping that traders hoped could signal an easing in U.S.-China trade tensions.
The pound stood tall after the Bank of England kept interest rates steady on Thursday and hinted at slightly faster future rate rises if Brexit goes smoothly.
World equity markets began November with a broad rally on Thursday after a brutal October, boosted by strong corporate earnings and hopes for a thaw in the U.S.-China trade row. That reduced some of the support for currencies like the dollar, which benefit in times of heightened risk aversion.
Market participants were awaiting the U.S. jobs report due at 1230 GMT for clues on the pace of further interest rate rises in the United States.
“Long-term U.S. yields have established a firm foothold above 3 percent, providing a strong backdrop for the dollar,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo. “And if the jobs report proves to be robust, we could see the dollar bounce back from recent losses and resume its rise.”
U.S. payroll figures are expected to have risen 190,000 in October from 134,000 in the previous month, with average hourly earnings seen increasing 0.2 percent in October after a 0.3 percent gain the previous month.
The dollar index had risen to 97.00 on Wednesday, its highest since February 2017, lifted by upbeat U.S. data and a corresponding rise in Treasury yields.
The dollar was higher against its major peers earlier this week, with the euro dogged by a lacklustre European economic outlook and a cautious-sounding Bank of Japan lending little support to the yen.
The greenback, however, pulled back as the pound surged on Thursday following reports that London is close to sealing a financial services deal with Brussels.
Sterling was a shade lower at $1.2990 but retained the bulk of its gains after surging 1.8 percent on Thursday, its biggest one-day gain since April 2017.
The euro inched down 0.05 percent to $1.1400 after gaining 0.9 percent overnight on the dollar’s retreat. The single currency had stooped to a 2-1/2-month trough of $1.1302 on Wednesday.
The dollar was steady at 112.710 yen after declining 0.25 percent on Thursday. The greenback has gained 0.8 percent versus the yen this week, during which it scaled a three-week high of 113.385.
“While a strong U.S. jobs report could push up Treasury yields and lift the dollar, an excessive climb in yields could depress equities and end up supporting the yen,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.
The Australian dollar dipped 0.1 percent to $0.7198 after jumping 1.8 percent the previous day.
The Aussie, which is sensitive to Chinese economic development, surged as presidents Trump and Xi both expressed optimism on Thursday about resolving their bitter trade disputes.
China’s yuan advanced 0.8 percent in offshore trade on Thursday. It was a touch lower at 6.9287 per dollar following the rally.
Worries about Chinese economic growth and the trade row had pushed the offshore yuan to a 22-month trough of 6.9800 midweek. (Editing by Sam Holmes and Kim Coghill)