* Dollar rises as U.S. yields touch fresh two year highs
* Fed minutes keep September tapering bets alive
* Dollar up more than 1 percent versus yen
* EZ PMIs buoy euro vs currencies other than dollar
LONDON, Aug 22 The dollar rose broadly on Thursday, tracking gains in U.S. Treasury yields as the Federal Reserve minutes kept alive prospects of a trimming of its monetary stimulus in September.
The dollar was up 0.5 percent against a basket of currencies at 81.638, after breaking through initial resistance at 81.604, its 200 day moving average. It hit an intra-day high of 81.719 which was a one-week peak.
The U.S. 10-year Treasury yield set a fresh two-year high of 2.936 percent on Thursday. Such a rise in yields can increase the attractiveness of dollar-denominated assets.
The minutes for the Fed's July 30-31 meeting, released on Wednesday, did little to alter expectations it could start trimming its bond purchases as early as next month.
"The Fed minutes have probably just led markets to expect more concretely that the central bank will begin tapering its stimulus shortly," said Lee Hardman, currency economist at BTMU.
"The high U.S. yields are leading to tighter global financial conditions which are leading to a repatriation of funds back to the U.S. from developing markets which is helping support dollar. In the near term the dollar looks very bullish."
The dollar was up more than 1 percent against the yen at 98.70 yen, breaking past the Aug. 15 peak of 98.66 yen which was acting as initial resistance.
The spread between U.S. ten-year Treasury yields and equivalent Japanese (JGB) yields stood at highs last seen in April 2011, favouring the dollar over the yen.
Marshall Gittler, head of global FX strategy at IronFX said that markets seem to perceive "each day of tapering is a day closer to the Fed raising rates." This would support the dollar as "over the long term this should mean higher U.S. real interest rates."
U.S. initial jobless claims data releasing at 1230 GMT will be closely watched. Lower figures could point to a solid August non-farm payrolls number due on Sept. 6, which would likely be a trigger for the Fed to start winding down bond purchases, said analysts.
Against the buoyant U.S. dollar, the euro slipped 0.3 percent to $1.3310 on reported selling by real money accounts. Chartists said support was at $1.3243, its May 1 high.
The euro had earlier pared losses against the dollar and gained broadly against other currencies after preliminary Purchasing Managers' Index data showed business activity across the euro zone picked up more than expected this month, led by Germany.
But analysts remain bearish on the euro versus the dollar given the interest rate differentials between the European Central Bank and the Fed.
"The ECB is still very vague about its forward guidance, just saying they are going to keep rates low for an extended period whereas the Fed is quite clear about its tapering," said Antje Praefcke, senior currency strategist at Commerzbank, adding that her bank was bearish on the euro and expects it to end the year at $1.27.
Although the euro struggled against the dollar, the PMI figures were supportive of the single currency which was up 0.7 percent against the yen at 131.32 yen, 0.2 percent up versus sterling at 85.48 pence and hit a near three-year high versus the Norwegian crown of at 8.1375 crowns.