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FOREX-Dollar in limbo before jobs data; sterling pulls ahead

* 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

SYDNEY, May 2 (Reuters) - The dollar struggled to make any headway early on Friday, still languishing near a three-week trough against a basket of major currencies as investors stayed on the sidelines ahead of a closely watched U.S. employment report.

The dollar index stood at 79.516, having fallen as far as 79.414, a low not seen since April 11. Investors had sold the greenback after data on Wednesday showed the U.S. economy stalled in the first quarter.

"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."

According to a Reuters poll, nonfarm payrolls probably advanced by 210,000 jobs in April, that would leave hiring well above its first-quarter average of 177,667 jobs per month.

U.S. data on Thursday had been more encouraging with consumer spending recording its largest gain in more than 4-1/2 years in March and factory activity accelerating last month.

Still, investors were cautious ahead of the jobs report. That saw the dollar move up only slightly against the yen to 102.28 from this week's trough of 102.02.

The euro traded at $1.3868, near a three-week peak of $1.3890. It was little changed on the yen at 141.80, in the mid-point of a 141.00-142.50 range seen in the past two weeks.

Sterling set a fresh milestone on Thursday, reaching a near five-year high of $1.6921 in the wake of upbeat UK economic data. However, by the close of New York trade, it was up a mere 0.1 percent at $1.6892.

Data on Thursday showed British manufacturing surged last month and house prices rose at the fastest pace since the financial crisis began.

Commodity currencies were also in a state of flux, particularly the Australian dollar which has been tethered to 93 U.S. cents since April 24.

Its kiwi counterpart fared slightly better this week rebounding to $0.8633 from a near one-month low of $0.8517 plumbed on Tuesday. Still, it has been searching for inspiration since scaling a 2-1/2 year peak of $0.8746 in April.

Sebastien Galy, strategist at Societe Generale in New York, noted that volatility in the G10 currencies have fallen sharply, reaching lows not seen since before the global financial crisis.

"Policy rates stuck close to the zero bound in the US, euro area, UK and Japan are to blame," he said.

(Editing by Shri Navaratnam)