* Large option expiries keep euro/dlr EUR= contained
* Dollar supported on expectations of strong U.S. jobs
* Euro rallies expected to be shallow, stays near 4-yr low
(Adds quote, detail)
By Neal Armstrong
LONDON, June 4 (Reuters) - The euro stayed close to a four-year low on Friday, hemmed in by options expiries with debt problems weighing on sentiment, while the dollar gained support on expectations of a strong U.S. employment report. The single currency has tumbled around 17 percent from its early 2010 highs as the crisis stemming from indebtedness of some euro zone countries escalated, fuelling concerns over the health of the currency bloc's banking sector.
"The euro remains under pressure. Even if U.S. jobs come in weaker than expected, it's likely there will just be a short-term correction to the upside for the single currency," said Antje Praefcke, currency strategist at Commerzbank.
A Reuters poll forecast 513,000 U.S. jobs were created in May but some in the market are anticipating an even stronger figure following upbeat data this week. [ID:nN02176933] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing changes in non-farm payrolls, click
"There is talk of 600,000 jobs being added and that kind of number would show that the U.S. economy is showing considerable momentum," Tony Morriss, senior currency strategist at ANZ.
On Thursday, data showed U.S. private employers added 55,000 jobs in May [ID:nEAP102300] [ID:nN02211844] and on Wednesday President Barack Obama said he expected the non-farm payrolls report to show strong jobs growth.
A robust number would fuel expectations the Federal Reserve will move first in tightening rates, ahead of the Bank of Japan, which is tackling deflation, and the European Central Bank.
At 0905 GMT, the euro EUR= was trading with small gains against the dollar at $1.2200, not far from a four-year low of $1.2110 hit earlier in the week.
Large option structures expiring on the Chicago Mercantile Exchange were likely to keep the price action contained.
"With this CME option expiring today at 1900GMT (1400 Chicago Time), gamma hedging from options market makers could serve to keep EUR/USD locked in a narrow range around 1.22," said Tom Levinson, currency strategist at ING.
Traders said there was also a huge double-no-touch structure with a $1.21-$1.25 range set to expire later in the day, which could keep the currency bottled up.
They were looking for a daily close under the 50 percent retracement of the 2000-2008 euro rally at $1.2135 to signal the next leg to the downside.
USD/YEN AT 2-WEEK HIGH
The dollar was slightly weaker on the day versus a currency basket .DXY at 86.937, staying close to a 15-month high hit on Tuesday at 87.473.
The greenback stood at 92.80 yen JPY=, steady from late U.S. trade. The greenback rose as high as 92.87 yen in early Asian trade, its highest in more than two weeks.
The euro was up 0.5 percent at 113.27 yen EURJPY=R, staying well above an 8 1/2-year trough hit below 109 yen last week.
Finance Minister Naoto Kan, a fiscal conservative, was chosen to become Japan's next premier in a ruling party vote on Friday. [nPOLJP]
Kan surprised markets earlier this year by saying he wanted the yen to weaken more and that most businesses were in favour of a dollar/yen rate around 95 yen.
(Editing by Toby Chopra)