FOREX-Dollar index hovers near 3-week low, eyes on US bond yields
* Dollar hovers near 3-week low vs basket of currencies
* Yen holds firm, stays within sight of 2-week high vs dollar
* Aussie steady after brief bounce on RBA policy statement (Updates levels, adds comments)
SINGAPORE, May 6 (Reuters) - The dollar hovered near a three-week low versus a basket of currencies on Tuesday as U.S. bond yields struggled to pull away from their recent troughs, with moves subdued in holiday-thinned trade.
The dollar index held steady at 79.459, hovering near a low of 79.414 set on May 1, its lowest level since April 11.
Against the yen, the dollar slipped 0.1 percent to about 102.02 yen, staying within sight of Monday's two-week low of 101.86 yen.
The dollar traded in a narrow range versus the yen, with Japanese markets closed on Tuesday for a public holiday.
The greenback has struggled in the wake of a volatile session late last week, when the dollar initially jumped in reaction to upbeat U.S. jobs data but later surrendered its gains.
"I think what's driving the market is the U.S. yields," said Sim Moh Siong, FX strategist for Bank of Singapore, referring to the lack of any significant push higher in Treasury yields.
The U.S. 10-year Treasury yield last stood at 2.606 percent , not far from a recent three-month low near 2.57 percent. Concerns about Ukraine have helped stir safe haven demand for Treasuries recently, dragging yields lower.
Still, U.S. economic indicators have suggested that the economy is starting to warm up after a bitter winter, and that could bode well for the dollar going forward, said Sim at Bank of Singapore.
"My inclination is to stick with the moderately strong dollar view. One has to be patient with the view... Right now, I'm not keen to abandon it because the fundamentals are in fact pointing in the right direction," he added.
The U.S. Institute for Supply Management said on Monday that its services sector index rose to 55.2 in April, the fastest pace in eight months and handily beating forecasts. A reading above 50 indicates expansion.
The data added to recent signs that the U.S. economy is emerging from a harsh winter-induced slowdown and provided a welcome offset to worries about China.
The Australian dollar inched up 0.1 percent to $0.9283 , having come off an intraday high of $0.9318 touched after the Reserve Bank of Australia kept interest rates unchanged at 2.5 percent as expected.
The Aussie dollar briefly bounced after the RBA said the currency was high historically, but refrained from calling for it to fall.
Some analysts said the RBA's view on the economy also seemed a bit more upbeat than before.
"There seems to be a slightly more positive tone to the statement itself. If you look at what they are saying about the labour market, they are saying that they have seen some improvement in indicators for the labour market," said Divya Devesh, FX strategist for Standard Chartered Bank in Singapore.
The euro held steady at $1.3879. A rise beyond its May 1 peak near $1.3889 would take the euro to its highest level since April 11. (Additional reporting by Ian Chua in Sydney; Editing by Kim Coghill)
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