FOREX-Dollar slips, market seeks clues on U.S. rates
* Dollar dips vs basket of currencies
* Dollar up vs yen on short-covering as equities rise
* Aussie rises after consumer confidence jumps
* Investors await more clues to test Fed rate hike view
TOKYO, June 10 (Reuters) - The dollar edged lower against a basket of currencies on Wednesday after sliding the previous day when investors questioned whether the economy had improved enough to justify talk of a Federal Reserve rate hike by the year-end.
The dollar rose against the yen as traders cited regional players actively covering short positions with Asian shares extending gains in afternoon trade. Tokyo's Nikkei average .N225 hit an eight-month high.
But most investors stayed on the sidelines ahead of the release of the Fed's Beige Book of regional economic conditions later in the day, which may offer further clues on U.S. rates.
Wednesday's auction of 10-year U.S. Treasury notes will be closely watched as the sale is seen as a test of confidence in the government's long-term credit-worthiness in light of a burgeoning deficit to finance its stimulus package and financial bailouts, traders said.
A further rise in long-term U.S. yields despite the Fed's buying of Treasuries after the benchmark 10-year yield spiked to seven-month highs earlier this week could add to concerns that ballooning U.S. borrowing could damage the dollar and the government's top AAA credit rating, market players said.
"Moves in U.S. interest rates have been complicating the dollar's direction recently, and the market now wants to see how the 10-year Treasury auction today will go and impact the dollar," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
The dollar index, a gauge of the greenback's performance against six other major currencies, dipped about 0.1 percent to 79.803 .DXY after falling more than 1 percent on Tuesday.
The euro rose 0.1 percent from late New York trade to $1.4084 EUR=.
The pound was steady at $1.6325 GBP=D4 after jumping about 1.7 percent on Tuesday as stronger-than-expected UK housing data and fading chances of a government collapse lifted sterling.
"The market is struggling to catch a clear trend in the dollar right now," said Yoshihisa Kanzaki, a trader at Shinkin Central Bank, adding that it was hard to make a big directional bet on the dollar.
The dollar rose 0.3 percent to 97.66 yen JPY=. It fell to as low as 97.08 yen on trading platform EBS earlier due to selling by Japanese exporters to repatriate overseas earnings.
The yen showed little reaction to news that core Japanese machinery orders unexpectedly slid 5.4 percent in April, because it did not alter views that the economy appears to be over the worst of its slump, traders said.
Other data on Wednesday showed Japanese wholesale prices fell 5.4 percent in the year to May, their fastest fall in 22 years and slightly bigger than an expected drop of a 5.1 percent. [ID:nT111682]
The Australian dollar rose 0.5 percent to $0.8063 AUD=D4 after a surge in a key measure of Australian consumer confidence fuelled hopes the economy could pick up at the end of the year, reducing the need for more interest rate cuts.[ID:nSYU006665] (Editing by Chris Gallagher) (Additional reporting by Masayuki Kitano)
