TREASURIES-Prices fall as Dubai safe-haven bid unwinds

* Profits taken after Friday's bout of safe-haven buying

* Safe-haven bid tied to Dubai debt standstill unwinds

* UAE provides liquidity window to banks in Dubai

* Abu Dhabi to selectively support Dubai firms-govt source

By Ellen Freilich

NEW YORK, Nov 30 (Reuters) - U.S. Treasuries retreated on Monday, unwinding gains made late last week on safe-haven buying related to a possible debt default in Dubai.

After two-year note yields fell on Friday to their lowest level this year as a possible debt default in Dubai sparked worries of another round of global economic turmoil, Treasury yields rose at the start of the new week.

"There's some unwinding of the safe haven bid after the UAE central bank said it stood behind the UAE banks," said T.J. Marta, market strategist at Marta on the Markets in Scotch Plains, New Jersey.

The United Arab Emirates central bank promised additional liquidity to local banks and an official in Dubai's oil-exporting neighbor Abu Dhabi said it would offer selective support to Dubai firms.

Benchmark 10-year Treasury notes US10YT=RR traded 11/32 lower in price, its yield rising to 3.24 percent from 3.21 percent late Friday. Two-year Treasury notes US2YT=RR were flat, yielding 0.70 percent. The yields dipped to 0.62 percent Friday, the lowest since last December.

Last week the Dubai government asked for a six-month repayment freeze on debt issued by state conglomerate Dubai World and its Nakheel construction unit. On Monday, a top Dubai finance official said the government would not guarantee Dubai World's debt.

In the United States, stock index futures pointed to a higher open on Wall Street as investors appeared more sanguine about the Dubai flagship firms.

On the economic data front, bonds registered little reaction to news that business activity in New York City expanded in November for the fourth consecutive month, while a gauge of business optimism was at its highest in more than three years.

The Institute for Supply Management-New York's seasonally adjusted index of current business conditions rose to 62.9 in November from 60.8 in October. The 50 level separates growth from contraction.

The Chicago Purchasing Manager's index (PMI) for November, a key indicator of the economic health of the manufacturing sector, is due at 9:45 EST (1445 GMT).

Later in the week, Federal Reserve chairman Ben Bernanke will testify Thursday before the Senate Banking Committee at a hearing on his nomination to a second four-year term.

In a preview of the rough treatment Bernanke may get on Capitol Hill, U.S. Senator Bernie Sanders said Sunday he will not vote to reconfirm Bernanke.

Five-year notes US5YT=RR slipped 4/32, their yields rising to 2.06 percent from 2.04 percent late Friday, while 30-year bonds US30YT=RR slid 14/32, their yields rising to 4.23 percent from 4.21 percent. (Editing by Chizu Nomiyama)

((ellen.freilich@thomsonreuters.com; +1 646 223 6309; Reuters Messaging: ellen.freilich.reuters.com@reuters.net))