Sterling steadies after brief rise above $1.50

(Recasts following afternoon retreat, adds more comment)

By Anirban Nag and Patrick Graham

LONDON, April 17 (Reuters) - Sterling retreated late on Friday, a strong UK jobs report proving too little to drive the currency on from a four-week high hit against the dollar earlier in the session.

Dealers said a partial recovery for the dollar had been the main driver, although the greenback remained set for its weakest week in a month after many investors pushed back expectations of a U.S. rate hike.

Data showed the number of people in work in Britain rose by 248,000 to a record 31.049 million last month, a robust performance compared with its euro zone peers.

But a combination of political risk before next month's national elections and doubts over Britain's economic prospects thereafter is weighing on sterling.

"The UK labour market report has market moving potential, but with the elections coming closer, the reaction to economic data is small or inexistent," KBC analysts said in a note.

Sterling gained as much as 0.6 percent to $1.5036, its highest since March 18, before falling back to $1.4935, flat on the day. It is still up just over 2 percent in a week which has seen a further rise in political noise ahead of May 7 polls. That looks largely the result of the dollar's fall this week.

Most polls show the Conservatives and Labour neck and neck, meaning a hung parliament is likely. A strong showing by smaller parties including the SNP also makes it hard to predict the result and whether a stable government can be formed.

"We really need further and substantial dollar softness for the pair to stay above $1.50," FXTM chief market analyst, Jameel Ahmad, said. "Otherwise, the downside risks are strong and investors are just looking at another opportunity to sell on rallies."

The dollar index fell for a fourth straight day, after a run of weak U.S. economic data cast doubt on prospects for a Federal Reserve rate rise in coming months.

And while UK data has been relatively better, inflation is still subdued near zero, allowing the Bank of England to keep interest rates lower for longer.

Also on Friday, data showed wage growth in Britain was still subdued. Total (Swiss: FP.SW - news) average weekly earnings in the three months to February, including bonuses, rose 1.7 percent compared with the same period a year earlier, slowing from 1.9 percent in January. Excluding bonuses, pay rose by 1.8 percent.

Economists taking part in a Reuters poll had forecast total earnings would rise by 1.8 percent and that earnings excluding bonuses would increase by 1.7 percent.

"The combination of election uncertainty, subdued inflation, and expectations that a UK rate hike is not factored in until well into 2016, means sterling will run into selling at higher levels," one London-based spot trader said.

The euro was up 0.1 percent against sterling at 72.14 pence. (Editing by Louise Ireland)