* DXY skids to 7-month lows as nonfarm payrolls rise falls short
* Sterling pressured after attack ahead of this week’s election
* Fed still seen hiking this month, but outlook now unclear
TOKYO, June 5 (Reuters) - The dollar edged up on Monday, but remained not far from the seven-month low it plumbed against a currency basket after disappointing U.S. employment data prompted investors to pare back expectations of U.S. Federal Reserve rate hikes.
The dollar index, which tracks the greenback against a basket of six major currencies, edged up 0.1 percent to 96.798 , not far from Friday’s nadir of 96.654, its lowest since Nov. 9.
Sterling slipped, under pressure after the third terrorist attack in Britain in less than three months killed at least seven people on Saturday.
The attack came days ahead of Thursday’s UK election, in which polls show British Prime Minister Theresa May’s lead over the opposition Labour Party has narrowed but is still intact.
U.S. nonfarm payrolls rose by 138,000 in May, Labor Department data showed on Friday, suggesting the labour market was losing momentum despite the unemployment rate falling to a 16-year low of 4.3 percent. Economists polled by Reuters had predicted an increase of 185,000.
While market participants still expect the U.S. central bank to raise interest rates this month, many expect a more dovish course for the second half of this year.
“The pessimistic story of the jobs data should weigh on the dollar as the Fed is still expected to hike rates in June, but most market participants believe it won’t hike for a long time after that, and maybe not in September or December,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
The dollar added 0.2 percent against the yen to 110.57 after brushing a two-week low of 110.25 earlier in the session, while the euro fell 0.2 percent to $1.1265 after rising to a seven-month high of $1.1285.
Slumping Treasury yields also weighed on the U.S. dollar, with the yield on the benchmark 10-year note at 2.169 percent in Asian trading, not far from their Friday low of 2.144 percent, which was their lowest since Nov. 10.
Net long positions on the U.S. dollar fell sharply in the latest week through May 30 to their lowest since September, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
At the same time, euro net long positions have risen to a more than six-year high, the CFTC data showed, in line with the improving eurozone economy.
Sterling shed 0.2 percent to $1.2868.
“We’re seeing some position-squaring ahead of the election now,” said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings in Tokyo.
“The broader backdrop is that Brexit is going to have many minuses for the UK economy going forward, and these concerns will remain no matter what the short-term impact is,” she said. (Reporting by Tokyo markets team; Editing by Eric Meijer)