* Dollar rises from Wednesday's slide
* Euro dips back below $1.18
* Fed watched for signs on balance sheet reduction
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh (Adds comment, updates prices, changes byline, dateline; previous LONDON)
NEW YORK, Aug 24 (Reuters) - The dollar edged higher on Thursday after another politically driven slide against the euro and yen in the previous session, as investors shifted focus away from government tension in Washington to an upcoming global central bankers' gathering.
But the respite was expected to be temporary as investors awaited key speeches from Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi at the Jackson Hole Economic Policy Summit in Wyoming. Still, no new policy messages are expected from either official.
The dollar has dropped 14 percent against the euro this year, driven by a collapse in expectations for tax cuts and other pro-growth moves by the administration of U.S. President Donald Trump that has weakened the case for further rises in U.S. interest rates.
A better-than-expected U.S. initial jobless claims on Thursday helped the dollar hold its gains. Data showed that initial claims rose 2,000 to a seasonally adjusted 234,000 for the week ended Aug 19.
"Today's data will do little to shift the market's bearish view of the dollar at present," said Dennis de Jong, managing director at online FX broker UFX.com in Limassol, Cyprus.
"Trump's 'government shut down' claims have done nothing to help investors buy the greenback, but continued improvement on the employment situation certainly won't harm long-term aspirations for U.S. economic growth."
Trump threatened Tuesday to shut down the government if Congress fails to secure funding for his wall along the U.S. border with Mexico. His threat rattled markets and drew rebukes from some Republicans.
In mid-morning trading, the dollar rose 0.2 percent to 109.22 yen and 0.1 percent to 93.231 against a basket of six major currencies used to measure its broader strength.
Some analysts suggested that Yellen could surprise the market and give a harder signal about a possible rate hike at its December policy meeting or on the reduction of the Fed's balance sheet, which is expected to start next month.
Any such remark from the Fed chair will likely boost the dollar, which on Thursday was a little higher versus the euro. The single euro zone currency was last down 0.1 percent at $1.1795.
Traders from Citi told clients in a morning briefing that they leaned towards expecting a bullish message for the dollar from Yellen.
The ECB's Draghi, on the other hand, could talk down a recently surging euro, some analysts said.
"The ECB might be more concerned about the strength of the euro and hence we are near $1.20 and not $1.25," said Jane Foley, currency strategist at Rabobank in London. "But I don't get the feeling that this uptrend (for the euro) is over yet."
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by Bernadette Baum)