* ECB expected to take benign view of economy on Thursday
* Sterling hits 10-day high as traders bet on Tory victory
* Graphic: World FX rates in 2017 (Updates prices, market activity and comments to U.S. afternoon trading; new byline)
By Saqib Iqbal Ahmed
NEW YORK, June 5 (Reuters) - The dollar steadied against a basket of currencies on Monday, recovering from a near a seven-month low hit on Friday, as investors turned their focus to this week's impending European Central Bank meeting and a parliamentary election in the UK.
The dollar index , which tracks the greenback against six major rivals, was up 0.1 percent to 96.809.
"We have seen investors square up their positions a little bit ahead of a busy week of economic events that include the ECB meeting and the UK election," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
The index slipped to 96.654 on Friday after data showed the U.S. economy created fewer jobs than expected last month, which could derail a possible interest rate hike by the Federal Reserve in the second half of this year.
Data on Monday showed U.S. services sector activity slowed in May as new orders tumbled, but a jump in employment to a near two-year high pointed to sustained labor market strength. The dollar rose against the euro as traders doubted that any European Central Bank shift in policy stance could strengthen the euro further.
ECB policymakers are set to take a more benign view of the economy when they meet on Thursday and will even discuss dropping some of their pledges to ramp up stimulus if needed, four sources with direct knowledge of the discussions told Reuters last week. Complacency that the ECB will be less dovish has left the euro vulnerable to disappointment if the central bank does not satisfy those expectations, analysts said.
"It has been very well-flagged that (the ECB) will be pivoting their language around the balance of risks and the forward guidance, and that's increasingly priced in," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York.
The euro was last down 0.24 percent against the dollar at $1.1253 after hitting $1.1285 on Friday, its highest since Nov. 9.
Sterling rose to a 10-day high against the dollar, with investors taking comfort from an opinion poll that gave Britain's ruling Conservative Party a comfortable lead ahead of Thursday's parliamentary elections. Sterling was last up 0.21 percent against the dollar at $1.2909 .
Meanwhile, Mexico's peso rose to its strongest level in seven months after the ruling Institutional Revolutionary Party (PRI) fended off a leftist rival in a key state election. (Reporting by Saqib Iqbal Ahmed; additional reporting by Sam Forgione; Editing by Dan Grebler and Cynthia Osterman)
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