FOREX-Euro off highs ahead of ECB, data set to drive currencies
* Euro recoils from two-month highs vs USD as ECB meeting looms
* Dollar index steadier after big fall earlier in the week
* Yellen offers no surprises, says U.S. economy still needs support
* Chinese & Australian data seen driving sentiment in Asia
By Ian Chua
SYDNEY, May 8 (Reuters) - The euro stepped back from a near two-month high against the dollar early on Thursday ahead of an interest rate review by the European Central Bank, while the greenback found a steadier footing after this week's surprisingly large pullback.
The euro last traded at $1.3911, down from a near two-month peak of $1.3952 set on Tuesday. The dollar also recouped a bit of ground against the yen, edging up to 101.88 from a three-week trough of 101.43.
That helped the dollar index drift up to 79.234 from a six-month low of 79.060.
The dollar had suffered a big fall on Tuesday after weeks of range trading, but managed to stabilise after Federal Reserve Chair Janet Yellen offered no surprises at her testimony to Congress on Wednesday.
Yellen reiterated the need to continue supporting the economy and gave few fresh clues on the direction of interest rates.
Trading in Asia is likely to be driven by major economic data including Chinese trade numbers for April due around 0200 GMT and Australia's employment report at 0130 GMT.
The China figures will be of particular interest to markets after exports unexpectedly fell for the second straight month in March and import growth dropped sharply.
The Aussie dollar was last at $0.9329, having eased from a two-week high of $0.9367. Any upside surprises in the jobs data could reinvigorate the currency, while a downbeat China trade report may equally embolden bears as the Asian economic powerhouse is Australia's biggest export market.
For the euro, the main focus is on the ECB, which is widely expected to keep interest rates on hold.
"Expectations are low heading into Thursday's ECB meeting, and our economists agree that a policy innovation is unlikely this month," analysts at BNP Paribas wrote in a note to clients.
"At the same time, action cannot be ruled out entirely, and with expectations so low, a surprise from the central bank could have a more powerful impact on markets than we have seen previously."
Indeed, traders said the euro could quickly fall back towards support just under $1.3800 in the event of any policy surprises, while inaction should see the common currency stay buoyed at current levels. (Editing by Shri Navaratnam)