FOREX-Dollar wallowing close to recent lows as Yellen awaited
* USD breaks decisively lower after weeks of range trading
* Ukraine crisis supports safe-haven bid for yen
* NZD falls from highs after RBNZ intervention warning
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, May 7 (Reuters) - The U.S. dollar languished close to six-month lows against a basket of major currencies on Wednesday, as investors braced for the possibility that dovish comments from Federal Reserve Chair Janet Yellen could further undermine the greenback.
Yellen is widely expected to hammer home the Fed's dovish position at her congressional hearings on Wednesday and Thursday, even after last Friday's upbeat U.S. payrolls report.
"She might be more confident about the U.S. labor market, but I think there will be no major surprises in her speech," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
"We don't have any important U.S. data tonight, so there is no good reason to accumulate long positions in the U.S. dollar," Murata said.
Against the yen, the dollar fell about 0.1 percent to 101.59 yen, not far from Tuesday's three-week low of 101.49 yen. The crisis in the Ukraine added to the traditional safe-haven appeal of the Japanese unit as Tokyo markets reopened after being closed on Monday and Tuesday for the Golden Week holiday.
Ukraine has experienced its deadliest week since the separatist uprising began, with supporters of Russia and of a united Ukraine trading accusations.
A somewhat downbeat Markit/HSBC services Purchasing Managers' Index (PMI) for China also weighed on investors' appetite for risk. Expansion in China's services industry slowed slightly in April, with employment growth slipping to a seven-month low.
The dollar index slid to its lowest in over six months on Tuesday in a decisive move after weeks of range trading. It was last at 79.132, up slightly on the day but not far from the previous session's trough of 79.060.
LOW U.S. YIELDS STYMIE DOLLAR
Frustration had been growing among some players at the dollar's inability to move higher even after the payrolls report, as the Federal Reserve continues to scale back its bond-buying support.
But market consensus seems to be forming on the view that the Fed is still a long way from raising interest rates even after it ends its quantitative easing programme, which is expected later this year.
Coupled with tame inflation, this has allowed U.S. Treasury yields to keep falling and has eroded the greenback's appeal.
"The heaviness of U.S. yields seems to be producing further unwinding of (perhaps long-held) long USD positions," noted Sean Callow, strategist at Westpac Bank.
The yield on the benchmark 10-year U.S. Treasury note stood at 2.584 percent in Asia on Wednesday, not far from a three-month nadir of 2.57 percent touched on Friday.
The euro was steady at $1.3925, close to Tuesday's two-month high of $1.3952. A strong single currency is putting more pressure on the European Central bank to ease policy at its meeting on Thursday.
ECB President Mario Draghi recently said further currency strength could be a potential trigger for policy action.
With the dollar on the back foot this week, sterling climbed to a near five-year peak of $1.6996 on Tuesday, and was last buying $1.6973, while the Australian dollar bought $0.9341, not far from Tuesday's two-week high of $0.9367.
The Aussie edged up after the Reserve Bank of Australia kept interest rates steady on Tuesday as expected and appeared resigned to the currency's strength.
By contrast, the New Zealand dollar tumbled on Wednesday after Reserve Bank of New Zealand Governor Graeme Wheeler said if the currency stayed high in the face of worsening fundamentals, "it would become more opportune for the Reserve Bank to intervene in the currency market to sell NZ dollars."
Markets are pricing in an 82 percent chance that the RBNZ will raise rates by 25 basis points to 3.25 percent at its next meeting in June.
The kiwi dropped more than half a U.S. cent on Wheeler's comments, falling as far as $0.8685 from a session high of $0.8744 in early trade.
It was last at $0.8690, down 0.6 percent on the day, though still not far from a 2-1/2 year high of $0.8779 hit on Tuesday against the backdrop of broad U.S. dollar weakness. (Editing by Shri Navaratnam & Kim Coghill)