FOREX-Dollar shade weaker after gaining on jobs data

SINGAPORE, May 5 (Reuters) - The U.S. dollar was a shade weaker on Monday but held on to most of last week's gains, supported by speculation the Federal Reserve will not need to cut interest rates again.

At 0250 GMT in holiday-thinned Asian trading, the euro had risen to $1.5460 <EUR=>, slightly above Friday's late level of $1.5424 but still well below April's record highs around $1.6018.

The yen remained weak as returning risk appetite encouraged traders to borrow yen at low interest rates to invest in high yielding currencies, such as the Australian <AUD=> and New Zealand <NZD=> dollars. One U.S. dollar bought 105.34 yen, far above 95.71, a 13-year low hit in March.

Activity was light with markets in Tokyo and London off for holidays and traders waiting to see if a survey on the U.S. services sector later in the session suggests the economy is as resilient as other recent figures have indicated.

The dollar firmed on Friday after U.S. payrolls fell in April by a smaller-than-expected 20,000, while the jobless rate actually dipped to 5.0 percent. [ID:nN02551119]

"The drop in the unemployment rate has strengthened the market's conviction that the Fed is done," said Darren Gibbs, an economist at Deutsche Bank.

"For the first time this year, near-ahead Fed funds expectations are flat with the actual Fed funds rate," he said. "What's more, the market is pricing a decent chance of a rate hike by the end of the year."

Still, while the jobs data was evidence the U.S. economy may not face as severe a slowdown as some had feared, analysts also said market participants could be prematurely pricing in an end to the Fed's rate cutting cycle because more dramatic weakness in the labour market was in store.

Strategists at RBC Capital Markets said a decline in average hourly earnings to the slowest pace since January 2006 was worrisome. The figures were included in Friday's jobs report.