* U.S. nonfarm payrolls up 266,000 in Nov
* Dollar stands firm but hemmed in by trade uncertainties
* Sterling near 7-month peak ahead of UK election
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Hideyuki Sano
TOKYO, Dec 9 (Reuters) - The dollar held firm on Monday
after data showed surprise strength in the U.S. jobs market, but
the currency was restrained from moving higher by worries about
an escalation in the U.S.-China trade war.
The dollar index =USD stood almost flat at 97.706 in
mid-Asian trade, after rising 0.3% on Friday. The euro traded at
$1.10575 EUR= , after hitting a one-week low of $1.10395 on
Friday.
The dollar changed hands at 108.58 yen JPY= . It had lifted
to 108.92 yen on the U.S. jobs data before losing momentum.
U.S. nonfarm payrolls increased by 266,000 jobs last month,
the biggest gain in 10 months, while the unemployment rate
ticked back down to 3.5%, its lowest level in nearly half a
century. Those figures suggested the Trump administration's 17-month
trade war with China, which has plunged manufacturing into
recession, has not yet spilled over to the broader U.S. economy.
Still, investors think that could change if trade tensions
escalate further, especially if Trump goes ahead with planned
tariffs on some $156 billion worth of products from China from
Dec. 15.
The market has been largely working on the assumption that
those tariffs, which cover several consumer products such as
cellphones and toys, will be dropped or at least postponed,
given that Washington and Beijing agreed in October to work on a
trade deal.
"Markets are sensing that both sides want to avoid a
collapse of their negotiation, judging from various news
headlines," said Kazushige Kaida, chief of forex at State
Street. "So the main scenario is for the dollar/yen to test
mid-109 yen levels."
Top White House economic adviser Larry Kudlow confirmed on
Friday that the Dec. 15 deadline to impose the new tariffs
remains in place, but added that President Donald Trump likes
where trade talks with China are going. China's exports shrank for the fourth consecutive month in
November, underscoring persistent pressures on manufacturers
from the Sino-U.S. trade war. Elsewhere, sterling traded at $1.3143 GBP=D4 , not far from
a seven-month high of $1.3166 set on Thursday.
Against the euro, the pound hit a 2-1/2-year high of 84.10
pence per euro EURGBP=D4 .
The currency has been bolstered by expectations that Prime
Minister Boris Johnson's Conservative Party will win an outright
majority in the upcoming election on Thursday, thereby ending a
hung parliament and political paralysis on Brexit.
The Conservative Party extended its lead over the Labour
Party to 14 percentage points, up from 9 percentage points a
week ago, an opinion poll by Survation for ITV's Good Morning
Britain showed on Monday.
"Markets now think the Tories will win. But if they fail to
win an outright majority, that means essentially nothing is
different from now and will be a fairly big shock for the
market," said Minori Uchida, chief FX analyst at MUFG Bank.
The Canadian dollar traded at C$1.3255 to the U.S. unit
CAD=D4 . The loonie shed more than 0.5% on Friday following
data showing the Canadian job market losing a surprise 71,200
net positions in November when economists had expected a gain of
10,000.