* Single currency hit by French election fears
* Cost of hedging euro volatility jumps
* U.S. dollar gains broadly
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By John Geddie
LONDON, Feb 7 (Reuters) - Beset by political worries, the euro was set for its biggest daily fall of 2017 on Tuesday against a broadly stronger U.S. dollar.
The single currency shed 0.8 percent against the dollar, with investors fearing far-right, eurosceptic candidate Marine Le Pen was gaining momentum before France's presidential election.
The cost of hedging volatility in the single currency against the dollar around the time of the final French vote on May 7 rose to its highest in over a week.
Elections in the Netherlands, Germany and possibly Italy, more wrangling over Greece's bailout and an upcoming reduction in the European Central Bank's monthly bond-buying volumes are also playing on investor nerves, analysts said.
The dollar itself, recovering from its worst start to a year in three decades, gained against a basket of other currencies, rising 0.7 percent. It was on track for its biggest daily gain since early January.
That strengthening accelerated after China reported its foreign exchange reserves unexpectedly fell below $3 trillion level in January for the first time in nearly six years .
"The euro is on the defensive with markets nervous not only about European political risks but also the upcoming reduction in ECB bond purchases," said Jeremy Stretch, head of currency strategy at CIBC.
"All in all its been a virtuous tailwind for the U.S. dollar this morning and there is also fear of capital flight (from China) which is feeding safe-haven flows."
The Japanese yen gave up earlier gains against the dollar and at 0900GMT was down 0.4 percent at 112.12 yen to the dollar .
The British pound fell as much as 0.9 percent to $1.2347, its lowest in two weeks, although it was steady against the euro at 86.24 pence
The Australian dollar shed 0.5 percent to $0.7621, after the Reserve Bank of Australia left interest rates unchanged. The New Zealand dollar dropped 0.3 percent to $0.7303.
On the data front, analysts said U.S. trade numbers due later on Tuesday could help determine the future direction of the dollar.
Widespread predictions late last year that the dollar would gain in early 2017 were upset by a combination of worries over U.S. President Donald Trump's protectionist bent and hints he would prefer a weaker currency.
"With the protectionist trade stance the United States is seemingly poised to adopt now a key market theme, the December U.S. trade data due later today garners attention," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.
"A trade deficit that exceeds forecasts would weigh on the dollar by raising caution in the market towards top U.S. officials, who may speak out against perceived dollar strength."
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by John Geddie, editing by Larry King)