FOREX-Big U.S. trade gap weighs on dollar; kiwi hit by soft wages

* Dollar under fresh pressure after weak trade data

* Big trade deficit could mean negative Q1 GDP

* New Zealand dollar hit by soft wages data (Updates prices, adds comments)

By Masayuki Kitano and Ian Chua

SINGAPORE/SYDNEY, May 6 (Reuters) - The dollar slipped on Wednesday, staying on the defensive after disappointing U.S. trade data for March painted an even bleaker picture of the economy in the first quarter.

The U.S. trade deficit jumped 43.1 percent to $51.4 billion in March, the largest since October 2008, after a surge in imports. Analysts said the deficit probably subtracted from growth, suggesting GDP could have contracted in the first quarter.

The dollar index, which measures the greenback's value against a basket of major currencies, eased 0.2 percent to 94.866, pulling away from a one-week high of 95.946 set on Tuesday.

Mitul Kotecha, head of currency strategy for Asia-Pacific at Barclays (LSE: BARC.L - news) in Singapore, said recent moves in yield differentials seemed to be weighing on the dollar.

"We are seeing U.S. yields higher, but at the same time yields elsewhere are also rising," he said.

"Even though U.S. yields are moving higher, the differential certainly with the likes of the euro and Aussie dollar has worsened," Kotecha said.

The yield gap between U.S. 10-year Treasury yields and their German counterparts had shrunk to about 166 basis points as of Tuesday, the narrowest since early April.

The euro rose 0.4 percent to $1.1229, edging back in the direction of a two-month high of $1.1290 set last Friday.

Against the yen, the dollar inched up 0.1 percent to 119.95 yen.

Later on Wednesday, the focus will shift to surveys of business activity in Europe.

The market will also be watching a report on U.S. private-sector employment that may affect expectations for Friday's U.S. nonfarm payrolls report.

"We think that both reports will show further improvement in the labour market after a short interruption," analysts at ABN AMRO Bank said in a research note,

Recent indicators, including a drop in jobless claims to a 15-year low in the week ended April 25, point to an improvement in the U.S. labour market, they added.

Some commodity currencies firmed as resource prices rallied. The Australian dollar added another 0.4 percent to $0.7967 after rising more than 1 percent on Tuesday.

The Aussie had also gained some support after the Reserve Bank of Australia gave no clear sign on Tuesday that it would ease policy again, following a widely expected cut in the cash rate to a record low 2.0 percent.

Some analysts now expect the RBA to stand pat for an extended period.

In New Zealand, a soft wages report added to pressure for a cut in interest rates and put the kiwi under immediate pressure.

It touched a near-one-month low of $0.7458 and last traded at $0.7485, down 1 percent on the day.

Japanese financial markets are closed on Wednesday for the Golden Week holiday. Trading resumes on Thursday. (Editing by Eric Meijer and Alan Raybould)