FOREX-Soft U.S. jobs data weighs on dollar, euro hostage to Greek vote

* Downbeat U.S. jobs data hurts dollar

* Investors cautious ahead of Greece's referendum on Sunday

* U.S. markets closed on Friday for Independence Day

By Anirban Nag

LONDON, July 3 (Reuters) - The dollar fell against a basket of currencies on Friday, hurt by softer than expected U.S. employment data and with most investors staying on the sidelines before Greece's referendum on bailout conditions at the weekend.

Volumes were expected to be low, with U.S. markets closed for Independence Day. Caution also reigned ahead of Greece's Sunday referendum on an international bailout deal that could ultimately determine whether it stays in the euro zone.

The dollar index was down 0.15 percent at 95.977, retreating from a four-week high of 96.422 hit earlier in the day. Against the yen, the dollar was buying 123.03 yen, flat on the day.

The euro edged up 0.15 percent to $1.1105.

"With liquidity thin and the Greek referendum coming up, not many would want to take large positions going into the weekend. The U.S. jobs report has taken the wind out of the sails for the dollar for the time being," said Alvin Tan, currency strategist at Societe Generale (Paris: FR0000130809 - news) .

The U.S. payrolls report showed employers hired 223,000 workers last month, fewer than the 230,000 increase forecast in a Reuters poll. The government also downgraded its reading on April and May job growth while wage growth remained subdued.

Investors had been hoping that solid improvement in the labour market would reinforce expectations that the Federal Reserve will raise interest rates as early as September.

While the downbeat report gave dollar bulls little to cheer, it was not gloomy enough to quash expectations that the Fed would tighten later this year.

All in all, major currencies were hugging familiar ranges, with the euro supported at the margins by a poll that showed supporters of Greece's bailout terms taking a wafer-thin lead over the "No" vote backed by the leftist government.

"For the euro, a "yes" vote at the weekend Greek referendum could lead to a bounce, but we would still prefer to sell it on rallies," added Societe Generale's Tan.

The International Monetary Fund warned on Thursday that Greece would need an extension of its European Union loans and a potentially large debt writeoff if it cannot implement economic reforms and its growth slows.

Analysts said negotiations after a "Yes" are likely to prickly and would keep gains in the euro limited.

"Though (a "Yes) outcome would be positive for global risk sentiment, as it reduces the likelihood of any financial contagion stemming from a Grexit, we expect the idiosyncratic euro risks to remain in place," ING said in a note. (Editing by Keith Weir)