FOREX-Dollar climbs in thin trade, Aussie off 7-mth peak

* U.S. dollar inches up in light trade

* Australian dollar takes a breather, off 7-mth highs

* Yen slips after Japan reports deflation, jobless rise

By Anirban Nag

SYDNEY, May 1 (Reuters) - The U.S. dollar climbed on Friday while commodity currencies took a breather from last month's feverish rally, as investors awaited for further signs that the pace of global economic decline was abating.

Trading was thin, with much of Asia, except Japan, headed out for the May Day holiday. Japan reported a drop in core consumer prices, putting the country in its second round of deflation in less than two years, while the jobless rate hit a 4-year high. [nT308650].

The dollar JPY= firmed a shade after the data to 98.91 yen from 98.73 beforehand.

"Investors are looking for signs of economic stability across the globe," said Jonathan Cavenagh, currency strategist at Westpac, Sydney.

"Currencies are expected to consolidate today, but any signs that data is better or in line with expectations could lift risk appetite and high-yielding currencies like the Aussie and the kiwi."

The euro EUR= was at $1.3246, off a two-week high of $1.3384, while the Australian dollar AUD=D4 eased back to $0.7290, nearly a cent below a seven-month high of $0.7384 struck on Thursday.

The Aussie jumped 5 percent against the U.S. dollar in April, while the greenback fell 5.2 percent on the Canadian dollar CAD=, the biggest monthly drop since September, 2007.

Risk appetite has been boosted by string of better global economic data nTOPMACRO and a note of optimism from the Federal Reserve earlier this week.

Encouraging U.S. employment and manufacturing data on Thursday have added to a burgeoning sense of optimism that helped the benchmark S&P 500 stock index .SPX post its best month in nine years.

The influential U.S. ISM report is due late in the day and is expected to show an improvement after reports showed that business activity in the U.S. Midwest contracted at a much less severe rate in April.

But news that U.S. automaker Chrysler has filed for bankruptcy on Thursday took some of the steam out of U.S. stocks. [ID:nLU940906]. Still Tokyo's Nikkei .N225 opened in positive territory, reflecting reasonably firm investor confidence.

So far investors are concentrating on signs of green shoots in the global economy, but sentiment remains vulnerable to jitters over a H1N1 flu virus breakout as Mexico began shutting down parts of its economy to slow the spread of the virus. nFLU

(Reporting by Anirban Nag; Editing by Wayne Cole)