* U.S. job data supports expectations of gradual rate hikes
* Euro touches 4-1/2-week low against dollar
* Yuan, yen nearly flat
By Daniel Leussink
TOKYO, Aug 6 (Reuters) - The dollar held firm against a basket of its peers on Monday after U.S. job data reinforced investors’ expectations the Federal Reserve will gradually raise interest rates this year.
The dollar, which measures the greenback against a basket of six other major currencies, was about 0.1 percent higher at 95.259, crawling back to a more-than-one-year peak of 95.652 reached on July 19. Investor attention has shifted to the yuan after the People’s Bank of China on Friday made it more expensive to bet against the currency, which helped it rebound from a near 15-month low against the greenback.
U.S. job growth slowed more than expected in July, but a fall in the unemployment rate suggested that labour market conditions were tightening.
“We’re seeing pretty consistent dollar strength across the board. The theme is there,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
“Although Friday maybe didn’t hit the target when it comes to the non-farm payrolls, it was still a positive number. It’s a good and strong number. If you line that up with previous releases, you see a trend,” he said.
The Fed kept rates unchanged as widely expected last Wednesday, and gave an upbeat assessment of the world’s biggest economy.
The euro was frail after slipping to a 4-1/2-week low against the dollar on Monday.
The single currency traded at $1.1563, near an intra-day low of $1.1557, its lowest level since changing hands at $1.15275 on June 28.
Offshore yuan was 0.14 percent higher on the day, trading at 6.8400 yuan per dollar.
The yuan pulled away from a near 15-month low against the greenback on Friday after China’s central bank said it would set a reserve requirement ratio of 20 percent from Monday on financial institutions settling foreign exchange forward dollar sales to clients, effectively raising the cost for investors betting against the yuan.
Kumiko Ishikawa, senior analyst at Sony Financial Holdings, said she thought it was likely China would allow the yuan to weaken further from its current level despite the move on Friday.
“The U.S. isn’t criticizing China very strongly on exchange rates, so for the time being it’s very likely the yuan will continue to depreciate,” she said.
The British pound ticked down to $1.2997, staying near a 2-1/2-week low of 1.2975 hit on Friday, while the Australian dollar was off slightly at $0.7394.
The yen weakened less than 0.1 percent against the dollar to 111.34 yen on Monday.
The yen had risen about 0.4 percent on Friday on worries about Sino-U.S. trade tensions after China proposed retaliatory tariffs on $60 billion worth of U.S. goods such as liquefied natural gas and aircraft.
But State Street Bank’s Wakabayashi said the negative impact on markets from the trade tariff exchanges between Washington and Beijing is not as acute it had been previously.
“Whenever there is an imbalance in the market in terms of uncertainty, the initial flight to safety is probably to the dollar, which is the preferred currency right now,” said Wakabayashi.
“We could extend that a bit to the yen, but definitely the dollar is receiving a lot of support,” he said. (Editing by Sam Holmes and Joseph Radford)