* Dollar index hovering above 3-week lows, focus on U.S. jobs
* Forecasts centre on 210,000 nonfarm payrolls in April
* Sterling holds near 5-year peak after upbeat UK data (Updates prices, adds comments)
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, May 2 (Reuters) - The dollar hovered above a three-week low against a basket of major currencies on Friday, as investors stayed on the sidelines ahead of a closely watched U.S. jobs report and appeared unmoved by clashes between Ukrainian forces and pro-Russian separatists.
The dollar index held steady at 79.543, having fallen to 79.414 on Thursday, its lowest since April 11. Investors had sold the greenback after data on Wednesday showed the U.S. economy stalled in the first quarter.
Major currencies showed limited reaction to the latest developments in Ukraine, where government forces launched a "large-scale operation" to retake Slaviansk, pro-Russian separatists holding the town in eastern Ukrain said on Friday.
Jitters over a crisis that has provoked the biggest confrontation between Russia and the West since the Cold War have at times weighed on risk sentiment and lent some support to safe haven currencies such as the yen, but on Friday the market's focus was locked on the U.S. employment report.
The dollar held steady against the yen at 102.36 yen. The greenback has been range-bound versus the yen since early February, having traded roughly between 101 yen to 104 yen over that span.
"I think a low print on nonfarm payrolls will see ... dollar/yen test the bottom of that range," said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore.
The euro eased 0.1 percent to $1.3862, having backed off slightly from Thursday's three-week peak near $1.3890.
According to a Reuters poll, U.S. nonfarm payrolls probably added 210,000 jobs in April, that would leave hiring well above its first-quarter average of 177,667 jobs per month.
"We would expect confirmation of above 200,000 jobs growth to erase some of the concerns raised by the weak reading on Q1 GDP, and this should be consistent with some recovery in the dollar," analysts at BNP Paribas wrote in a note to clients.
"Most forecasts fall between 200,000 and 235,000, and it would likely take a result significantly outside that range to generate more dramatic FX moves."
Sterling held steady at $1.6886, taking a breather after reaching a near five-year high of $1.6921 on Thursday, in the wake of upbeat UK economic indicators.
Data on Thursday showed British manufacturing surged last month and house prices rose at the fastest pace since June 2007.
The pound, which is up 0.5 percent on the week, faces resistance on monthly charts at around $1.6950, the top of the cloud on the monthly Ichimoku chart -- a popular technical analysis tool.
A clear breach of that level would be a bullish technical signal. On the other hand, there are some signs of short-term overheating, with sterling's 14-day relative strength index now at above 70 and in overbought territory.
(Additional reporting by Masayuki Kitano in Singapore; Editing by Simon Cameron-Moore)
- Banking & Budgeting