The dollar edged up slightly on Friday as investors braced for key U.S. payroll data to gauge the economic outlook, while UK political uncertainty hit sterling. Weekly U.S. employment data released on Thursday suggested the haemorrhaging of jobs in the world's largest economy may be easing, although further evidence will come later on Friday with the May non-farm payrolls report. The U.S. payrolls report is expected to show the economy shed 520,000 jobs in May and the unemployment rate rose to 9.2 percent from April's 8.9 percent. Data is due out at 1230 GMT. Analysts said it could take shockingly poor figures to spark risk aversion, especially as investors are well aware that job losses will not dramatically decrease in the near term after bankruptcy filings by General Motors and Chrysler. "The current market theme of higher U.S. bond yields, stronger equities and weaker dollar is well intact," said Geoffrey Kendrick, currency strategist at UBS. Given the rate of decline in payrolls will likely moderate, "a weak dollar run could go a little further," he added. By 1055 GMT, the dollar index, a gauge of the greenback's performance against a basket of six currencies, was up 0.1 percent on the day at 79.545 .DXY. It hit the year's low of 78.334 on Tuesday. The euro was flat at $1.4177 . "The rise in yields seems very specific to the government bond sector, and is not spreading to other credit markets. This suggests a higher level of risk appetite is being maintained, pushing equity markets higher and supporting cyclical currencies, with the exception of sterling," said Ian Stannard, senior currency strategist at BNP Paribas.

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