FOREX-Dollar holds steady after larger-than-expected rise in May payrolls

By Hannah Lang and Amanda Cooper

WASHINGTON/LONDON, June 2 (Reuters) - The U.S. dollar mostly held steady in choppy trading after May's non-farm payrolls report on Friday showed employment surged but the unemployment rate also rose.

The report showed that payrolls in the public and private sector increased by 339,000 in May, surging past expectations. Economists polled by Reuters expected non-farm payrolls to have increased by 190,000 in May, from April's 253,000 rise.

The dollar index, which measures the U.S. currency against six others, was last up 0.203% at 103.730.

Before the U.S. Labor Department released the data, the dollar was headed for its largest weekly fall since mid-January on Friday as the view took hold among investors that the Federal Reserve will forgo an interest rate hike this month, which would diminish the greenback's appeal to non-U.S. buyers.

Money markets are pricing in a roughly 29% chance of a June hike, down from near 70% earlier in the week.

The euro was unchanged at $1.0762, hovering near its highest in around a week, thanks to a boost on Thursday from European Central Bank President Christine Lagarde, who said further policy tightening was necessary.

(Reporting by Hannah Lang in Washington and Amanda Cooper in London; Additional reporting by Dhara Ranasinghe in London and Kevin Buckland in Tokyo Editing by Mark Heinrich, Mark Potter, Andrew Heavens and Emelia Sithole-Matarise)