By Saikat Chatterjee
LONDON (Reuters) - An under-pressure dollar held on Thursday above a 2-1/2-year low versus the euro hit in the previous session as investors readied for U.S. jobs data.
The dollar index, which measures its value against a basket of six major currencies, rose about 0.1 percent to 92.940. On Wednesday, it slid to 92.548, its weakest since May 2016.
"It would need a substantially good jobs data (reading on Friday) to mitigate some of the growing bearish sentiment around the dollar and, barring that, we should see the dollar continue to trade lower," said Viraj Patel, an FX strategist at ING in London.
Despite double-digit U.S. earnings growth in the second quarter and private sector payroll growth last month of another 178,000, expectations of a third Federal Reserve interest rate rise have dissipated and futures markets now only see a 35 percent chance of another hike by the end of 2017.
The dollar's decline has pushed the euro higher with the single currency hitting a 2-1/2-year high of 1.1910 against the dollar on Wednesday. It was trading a shade below that at $1.1844 on Thursday.
Despite the single currency's more than 12.5 percent rise against the dollar this year, a Reuters poll found risks still skewed more in favor of the single currency, driven by expectations the European Central Bank will start to scale back its stimulus program.
The poll of more than 60 foreign exchange strategists showed the euro will weaken slightly in the coming year but is expected to close 2017 higher than where it started the year.
Sterling was trading a touch higher at $1.1323 before a Bank England policy decision later in the day. Markets expect the Bank to have turned more dovish again after a burst of hawkishness in June.
(Reporting by Saikat Chatterjee; editing by John Stonestreet)