* Dollar index firmer, but down from near 3-year high * Yen dips after minister says seeks 'balance' for currency * European shares fall on fears Fed may scale back stimulus By Marc Jones LONDON, May 21 The dollar firmed, gold fell and shares slipped off five-year highs on Tuesday as investors postioned for an update on the future of the U.S. Federal Reserve's stimulus programme. A slowdown in British inflation sent sterling to a 7-week low on the view it could give the Bank of England more leeway to support the UK economy, and the yen lost ground after a Japanese minister rowed back on remarks suggesting the currency had weakened enough. The constant drip of global central bank stimulus during the financial crisis has pushed many financial markets to their highest levels in years, but in recent weeks Fed officials have started talking more openly about scaling back the bank's support. That has made Wednesday's release of minutes from the central bank's last meeting and Fed chairman Ben Bernanke's testimony in Congress the main focus for markets waiting for the first signs of a clear shift change in attitude. The usually dovish Chicago policymaker Charles Evans said on Monday that while the pickup in the U.S. jobs market continued he was "open-minded" about slowing the bank's bond-buying, and mentioned the idea of simply halting it. The dollar was up 0.4 percent against a basket of major currencies at midday in Europe, comfortably below its recent three-year high. U.S stock futures pointed to steady open on Wall Street. Economists expect Bernanke to deliver a steady message on the bank's policy when he speaks to Congress. But any hint that it plans to scale back its support could unsettle markets. Having hit a five-year high on Monday, top European shares were 0.4 percent lower by 1130 GMT as traders took the uncertainty as a cue to lock in some of the recent sharp gains. "With the economic numbers being pretty good in the States, there may be an easing back of QE (bond-buying stimulus) sooner rather than later," said Berkeley Futures associate director Richard Griffiths. "The DAX and Euro STOXX 50 have moved ahead a lot more than the UK, so in the event of any profit-taking in the U.S., the European markets may drop just that little bit more." GREECE LIGHTENING If the Fed does tighten policy by slowing its bond-buying, benchmark bond yields would be pushed up, and in the debt market, safe-haven German Bund futures lost ground. In Greece, 10-year yields fell below 30-year ones for the first time in three years - popping its bond curve back into a more normal shape in a sign that some are starting to believe the worst may be over for the euro zone's most troubled economy. "The perception of investors has changed," said ING strategist Alessandro Giansanti in Amsterdam. "There has been a change in trend in public finance policies. If the trend of reduction in the deficit continues we cannot rule out that even next year (Greece) can come back to the market." YEN, METALS YO-YO Earlier in the day, Japan's Nikkei share index crept to a 5-1/2 year high. The yen shed some of Monday's gains after Japan's economy minister said his comments the previous day that the government was satisfied with the level of the currency had been misinterpreted. A recent downward slide in precious metals also resumed. Gold was down 1 percent at $1,376 an ounce as the stronger dollar left it facing its eighth fall in nine sessions. Silver dropped as much as 2.2 percent to trade near the 2-1/2-year lows hit during a 6 percent slide on Monday, when an unidentified investor sold off a large holding. While low inflation prospects has dulled demand for traditional hedge gold, silver has fallen out of favour with investors recently as demand from the solar energy sector has also sagged and mining of the metal has increased. "The market was caught horribly short yesterday, so there was some buying this morning. But the dollar started to get stronger and gold didn't manage to break above $1,400, so sales started again," Marex Spectron head trader David Govett said.