By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The yen posted strong gains for a third straight session on Thursday, while sterling fell yet again, retreating from early gains as risk appetite crumbled in afternoon trading with the decline in major U.S. stock indexes and commodity prices.

The British pound recovered in the London session and the first half of New York trading, then slid again as investors grew a little cautious ahead of a crucial U.S. non-farms payroll report due on Friday.

The consensus forecast is for a 175,000 jobs gain for June, according to a Reuters poll, but investors remained wary given the unexpected negative surprise in payrolls the previous month.

Friday's U.S. job report is expected to have the most impact on the dollar/yen currency pair. Since the beginning of the year, the dollar has fallen 19 percent versus the Japanese currency.

"For dollar/yen to have a positive response to non-farm payrolls, we would need to see payrolls rise by 200,000 or more and see average hourly earnings growth hold steady or exceed 0.2 percent," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.

"Given the magnitude of last month's disappointment, that's a lot to ask for. However in order for any recovery to be sustained, we need to see payrolls rise by 250,000 or more, otherwise the reversal post-data will be quick and aggressive," she added.

In late trading, sterling slipped 0.1 percent against the dollar at $1.2919 <GBP=D4>, having skidded to a 31-year low of $1.2798 on Wednesday. It has been down more than 14 percent since the Brexit vote.

Sterling, which had fallen for two straight days, had rebounded early, as better-than-expected UK factory data and a rise in some global stocks prompted investors to book profits on bets they had made against the currency.

The pound's outlook still looked bleak after Britain's shock vote to bolt the European Union, with some analysts expecting it to drop to $1.20 in coming months as the Bank of England prepares to ease monetary policy.

The dollar was 0.5 percent lower against the yen <JPY=> at 100.78 yen, holding above its trough of 99 yen hit on June 24, the day after the UK vote. It trimmed losses after a report showed U.S. private payrolls rose more than expected in June and jobless claims were lower than forecast.

The euro, meanwhile, fell 0.8 percent against the yen to 111.56 yen.

(Additional reporting by Anirban Nag in London; Editing by David Gregorio)