* Dollar broadly weak as recovery seen hampered by virus
* Euro near 2-year peak vs dollar, 16-month high vs yen
* Investors look to upcoming jobs data
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E (Updates prices)
By Hideyuki Sano and Eimi Yamamitsu
TOKYO, Aug 6 (Reuters) - The dollar struggled on Thursday under the weight of worries the U.S. economic recovery may lag other countries due to a high level of coronavirus infections, as investors looked to upcoming data on the U.S. labour market.
The dollar's index against a basket of currencies =USD stood almost flat at 92.814, having fallen more than 0.5% in the previous session to approach its two-year low of 92.539 marked last Friday.
"Dollar-selling seems to have resumed. We are having the same structure we saw in July," said Shinichiro Kadota, senior strategist at Barclays (LON: BARC ).
A decline in the U.S. currency has gathered pace since late July on rising perception that the U.S. economic recovery could be hobbled by the country's poor performance in containing the COVID-19 outbreak.
The euro changed hands at $1.1869 EUR= , having gained 0.5% in the previous day's trade to stand just below Friday's two-year high of $1.1908, extending its bull run since European leaders agreed on a recovery fund on July 21.
The common currency held an upper hand against the yen, trading at 125.25 yen EURJPY=R , having hit its highest since April last year in the previous session.
The U.S. currency slipped a tad to 105.52 yen JPY= .
The dollar extended losses in the previous session after data showed U.S. private payrolls growth slowed sharply in July, suggesting the labour market recovery was faltering. separate survey by the Institute for Supply Management (ISM) also showed U.S. services industry activity gained momentum in July as new orders jumped to a record high but here too, hiring declined, stoking worries about upcoming job figures. data due at 1230 GMT is expected to show a slight decline in initial claims to 1.415 million last week from 1.434 million in the preceding week.
On Friday government data is expected to show payroll growth slowing to 1.6 million in July from 4.8 million in June.
With more than 30 million people on jobless benefit, recovery in employment is seen as critical to the U.S. economy, with many investors counting on another fiscal stimulus to support the economy.
Top congressional Democrats and White House officials appeared to harden their stances on new coronavirus relief legislation, however, as negotiations headed toward an end-of-week deadline with no sign of an agreement. expect a deal will be reached before the Congress will adjourn on Aug. 10. So far there are few signs of compromise, leaving markets unable to react," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
If the two sides reach a middle ground, the dollar could rebound, he added.
Sterling also edged near Friday's 4-1/2-month high of $1.3170, last quoted at $1.3129 GBP=D4 .
The Bank of England looks set to hold off from taking further action at its policy review later in the day, by keeping its benchmark interest rate at an all-time low of 0.1% and its bond-buying stimulus programme unchanged at 745 billion pounds ($980 billion). U.S. dollar sank to its lowest in almost half a year against the Canadian dollar at C$1.3273 CAD=D4 .
The offshore Chinese yuan traded at 6.9439 per dollar CNH= , near its five-month high of 6.9324 on Wednesday.
Plummeting U.S. bond yields, especially in inflation-adjusted terms, are undermining the attraction of the dollar, which had boasted highest yields among major currencies before the pandemic.
"It's difficult to buy the dollar with such a decline (in U.S. rates), and it's understandable how gold is being bought to substitute for the dollar," said Yukio Ishizuki, senior strategist at Daiwa Securities. (Editing by Lincoln Feast and Jacqueline Wong)
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