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FOREX-Euro dips as traders look towards ECB meeting

* Traders awaits Thursday’s ECB meeting

* Euro falls as recent dollar selling pauses

* Sterling tanks on threat to EU divorce deal

* Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E (Adds new quote, latest prices, details)

LONDON, Sept 7 (Reuters) - The euro fell on Monday as traders that have pushed the single currency to multi-year highs took a breather and prepared for the European Central Bank meeting on Thursday to see if policymakers will introduce yet more stimulus.

The dollar has tumbled to more than two-year lows against the euro in recent weeks as investors bet U.S. interest rates would stay low for longer just as European policymakers agreed a significant recovery fund to boost the economy in Europe.

But the greenback has steadied in recent sessions, especially after the euro’s brief flirtation with the $1.20 level was followed by selling of the single currency.

Kit Juckes, FX strategist at Societe Generale, said that while investors’ euro long positions were not growing “they’re huge and rate/yield differentials aren’t moving in a supportive direction any more either.”

He added that the “‘Europe’s doing better than the US’ story is tired”, leaving euro-dollar range-bound for now.

U.S. jobs data on Friday also helped the dollar. The U.S. Labour Department report showed that U.S. employment growth slowed and permanent job losses increased as government funding started running out. Still, the jobless rate fell to 8.4% from 10.2% in July but Juckes said the numbers showed a productivity surge as employment growth lagged rebounding U.S. economic growth.

Attention is turning to Thursday’s ECB meeting, where investors are not expecting any major policy changes but will listen closely for anything said about the euro after a blistering rally that has likely unnerved some policymakers.

“Jawboning by ECB officials worried about the euro’s rise has helped calm fevered USD bearishness,” Alvin Tan, an FX Strategist at RBC Capital Markets, said.

By 1030 GMT, the euro was down 0.2% at $1.1815 while the dollar index, which measures the dollar against a basket of currencies, gained 0.2% to 93.082.

U.S. financial markets are closed for the Labour Day holiday so trading volumes are likely to be thinner than usual.

Elsewhere, the big mover was sterling, which slid 1% after Britain reportedly threatened to override its European Union divorce deal. The currency weakened to as low as $1.3145 while against the euro it dropped 0.8% to 89.88 pence .

Against the yen, the dollar traded at 106.26, unchanged on the day.

The Chinese offshore yuan was little changed and last fetched 6.8343 per dollar after customs data on Monday indicated that the country’s exports marked the strongest gain since March 2019 while imports slumped.

Editing by Ed Osmond and Andrew Heavens

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