By Brigid Riley

TOKYO (Reuters)

The dollar steadied against major peers on Friday as investors awaited the U.S. jobs report to confirm economic resilience ahead of the Federal Reserve's monetary policy meeting and a close-call U.S. presidential election next week.

The yen maintained Thursday's gains as investors digested a less dovish message from the Bank of Japan in the previous session.

The U.S. dollar started the month lower after facing pressure against the yen on Thursday. However, the greenback's gains in October were the largest since September 2022, as investors adjusted their aggressive Fed rate cut expectations and considered the U.S. election outlook.

U.S. nonfarm payrolls data closed out the week with economists estimating the addition of 113,000 jobs in October. Analysts suggest recent hurricanes may impact this number, making the October jobs report "incredibly hard to read," according to Tapas Strickland, head of market economics at National Australia Bank.

The unemployment rate, expected to be 4.1%, may provide a clearer picture of labor markets. Such an outcome could indicate a lower unemployment rate than the FOMC's September projections of 4.4% in Q4 2024, raising questions about the necessity for rate cuts.

Recent data indicated easing upward price pressures, contributing to a trend of positive data and supporting bets that the Fed may cut interest rates by 25 basis points next week.

The dollar index, measuring the greenback against six major currencies, rose 0.06% to 103.94, while the yen fell 0.11% to 152.18 per dollar.

On Thursday, Japan's central bank kept ultra-low interest rates but indicated that risks surrounding the U.S. economy were subsiding, signaling that conditions may favor raising interest rates again. Morgan Stanley MUFG economists raised the chances of a December rate hike and forecasted a January increase to 0.5%, influenced by the dollar/yen exchange rate and inflation data.

The euro reached a two-week high against the greenback after data revealed euro zone inflation accelerated more than expected in October, down 0.04% at $1.0879. Sterling traded slightly lower at $1.28955, impacted by British Finance Minister Rachel Reeves' major tax increases in her budget, leading to a decline to $1.28445.

The Fed's monetary policy decision arrives just days after the U.S. presidential election. Republican candidate Donald Trump and Democratic Vice President Kamala Harris remain close in polls, with some investors favoring Trump, which lifted the dollar and U.S. Treasury yields. Trump's promised tax cuts, relaxed financial regulations, and increased tariffs are perceived as inflationary factors that could slow the Fed's policy easing.

In other news, China's manufacturing activity returned to growth in October, driven by an expansion in new orders and increased production. Prices of new homes in China also rose faster in October, with the offshore yuan trading at 7.1299 yuan per dollar. In cryptocurrencies, Bitcoin's market cap valued it at approximately $69,130.