FOREX-Dollar trades quietly ahead of U.S. payrolls

	By Justyna Pawlak LONDON, June 4 (Reuters) - The dollar drifted in tight ranges versus other major currencies on Friday as investors awaited key U.S. jobs data and after OPEC's Thursday pledge to pump more oil failed to clear uncertainty over oil prices. The U.S. labour market recovery and steep fuel costs are two key factors that may determine whether the Federal Reserve raises interest rates as soon as this month or later in the year. Many investors already expect a rate hike at the Fed's June 29-30 meeting, following strong U.S. numbers that include recent steep payrolls rises. But the potential for damage to economic growth from high fuel costs may persuade the Fed to wait longer. "It's payrolls day and no one particularly wants to sit on a big position," said Jim Webber, chief economist at Toronto Dominion Securites in London. "Everybody is of the view that the Fed will raise rates (in June) and there's a sense that if they don't then it's a missed opportunity and there may be the perception they are behind the curve." At 0930 GMT the dollar traded at $1.2200 per euro , slightly down on the day but up from a two-month low of $1.2305 set earlier this week. It was at 111.00 yen , steady on the day, and at 1.2531 Swiss francs , mildly stronger. Oil prices hovered just below $39 a barrel after the Organisation of the Petroleum Exporting Countries decided to increase output quotas by a combined two million barrels a day. GROWTH OBSTACLES The dollar, which has been hit by concern that soaring oil prices could hurt the U.S. economy and delay a rise in rates, failed to make substantial gains from OPEC's decision. Analysts said OPEC's move was at the lower end of expectations and did little to wipe out concerns about potential supply disruptions in the Middle East. Earlier this week, deadly attacks by Islamic militants in Saudi Arabia pushed oil prices to their highest levels in more than two decades, above $42 a barrel. "The OPEC announcement was basically in line with expectations, if not a little disappointing," said Shahab Jalinoos, senior currency strategist at ABN AMRO in London. "There was nothing there to make it clear to the market that prices will not continue higher, but it seems OPEC is at least making an effort so that's why there was no major move in the dollar on the back of OPEC." However, the yen drew brief support from a rise in the Tokyo stock market's benchmark Nikkei average <.N225>, which closed up 0.92 percent after the OPEC move caused oil prices to fall. With oil uncertainty appearing to stay high for now, investors are looking to the payrolls data for guidance on U.S. rate prospects, which are now the key theme in currency markets. Higher U.S. rates would be a positive development for the dollar by making interest-bearing U.S. assets more attractive. "Oil is important because high prices have led the market to question the very optimistic growth assumptions," said Jalinoos. "People are not making big investment decisions before the payrolls numbers. Unless we get a really outlandish number, the market will wait for the Fed meeting. Why make decisions now if you can wait for the outcome of the meeting?" The payroll figures, the last major data before the Fed's next meeting, are expected to show a rise of 216,000 jobs in May, compared with 288,000 jobs added in April. The numbers are due at 1230 GMT. Meanwhile, euro zone retail sales rose more than expected, increasing by 1.1 percent in April from March, compared with a market consensus for 0.4 percent. U.S. Treasury Secretary John Snow speaks at a roundtable discussion at 1330 GMT and Federal Reserve Board Governor Donald Kahn speaks at 1630 GMT.