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FOREX-Euro off highs ahead of ECB; Aussie buoyed by upbeat data

* Euro stays below two-month high as ECB meeting looms

* Aussie rises on upbeat local jobs data and China trade data

* Dollar index steadier after big fall earlier in the week

* Yellen offers no surprises, says US economy still needs support (Updates levels, adds comments)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, May 8 (Reuters) - The euro held below a near two-month high on Thursday ahead of an interest rate review by the European Central Bank, while the Aussie rose on better-than-expected data on Australian jobs and Chinese trade.

For the euro, the main focus is the ECB, which is widely expected to keep interest rates on hold.

"Expectations are low heading into Thursday's ECB meeting, and our economists agree that a policy innovation is unlikely this month," analysts at BNP Paribas wrote in a note to clients.

"At the same time, action cannot be ruled out entirely, and with expectations so low, a surprise from the central bank could have a more powerful impact on markets than we have seen previously," they said.

The euro edged up 0.1 percent to $1.3917, but remained below a near two-month peak of $1.3952 reached on Tuesday.

Traders said the euro could quickly fall back towards support just under $1.3800 in the event of any policy surprises.

If the ECB stands pat, the common currency could stay buoyed at current levels, market participants said.

"I'm not sure if that will be enough of a factor for the euro to test levels above $1.40," said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore, referring to how the euro might react if the ECB keeps policy unchanged.

Still, if the ECB holds off from additional stimulus as expected, the euro will probably stay "oddly strong", Ino said.

The euro is seen as having drawn support in recent months from factors such as the euro zone's current account surplus as well as signs of inflows into euro zone assets.

That has kept the euro resilient even in the face of an expected divergence in the outlook for U.S. and European monetary policy, with the Fed in the midst of winding down its massive stimulus while the ECB is seen likely to keep monetary policy loose or possibly ease further in coming months.


The Australian dollar outperformed, getting a boost after data showed that Australian jobs growth beat expectations for a third straight month.

The Aussie dollar rose 0.5 percent to $0.9373, having added to its gains after data showed that Chinese exports and imports both rose slightly in April from a year ago, against forecasts for them to decline.

The data offered some rare good news about the slowing economy in China, Australia's biggest export market.

"You've seen firmer export performance in Korea, Taiwan, Philippines and Malaysia recently," said Greg Gibbs, FX strategist for RBS in Singapore.

"So there's a bit of a theme there, consistent with some improvement in the global economic outlook. That certainly supports the Aussie," he said.

In addition, the U.S. dollar has been weak and market volatility has been generally low globally, which encourages trades aimed at benefiting from higher yields, Gibbs added.

The dollar held steady versus a basket of major currencies at 79.208, up slightly from a six-month low of 79.06 on Tuesday.

The dollar suffered a big fall on Tuesday after weeks of range trading, but managed to stabilise after Federal Reserve Chair Janet Yellen offered no surprises in her testimony to Congress on Wednesday.

Yellen reiterated the need to continue supporting the economy and gave few fresh clues on the direction of interest rates.

The dollar eased 0.1 percent to 101.84 yen, holding above a three-week low of 101.43 yen set on Wednesday.

(Editing by Richard Borsuk)