* Dollar slips against most major currencies
* Treasury yields fall seen capping dollar strength
* Fed meeting minutes on Wednesday in focus (Adds quote, details on Treasuries, updates prices)
By Karen Brettell
NEW YORK, July 7 The dollar weakened against the yen and the euro on Monday, in line with strengthening Treasuries, as investors continued to digest last week's strong U.S. employment report and speculated about when the Federal Reserve is likely to begin raising U.S. interest rates.
U.S. bonds recovered from a selloff heading into last week's employment report, which showed nonfarm payrolls increased by 288,000 jobs last month and the unemployment rate fell to 6.1 percent from 6.3 percent in May.
The next major focus will be the release on Wednesday of minutes from the Fed's June meeting, which will be scoured for signs about when central bank members see an interest rate increase as likely.
"The discussion won't reflect the strong bounce in nonfarm payrolls, but will serve as a reference as to what the internal debate is in the FOMC regarding the first rate hike," said Martin Schwerdtfeger, a foreign exchange strategist at TD Securities in Toronto.
Goldman Sachs economists on Monday brought forward their expectations of the first rate increase to the third quarter of 2015 from the first quarter of 2016, following similar actions from some other banks last week.
The dollar has been largely rangebound against the euro and the yen for the past two months as benchmark 10-year Treasuries have largely held below 2.66 percent. U.S bond yields have stayed relative low despite data that shows that the economy is improving from a weak beginning to the year.
"The dollar has tracked falling yields for the most part," said Richard Franulovich, senior currency strategist at Westpac Securities in New York. "The fact that yields cannot sustain an increase is a problem for the dollar."
The dollar fell 0.25 percent against the yen to 101.85 yen, down from 102.10 yen late on Friday.
The dollar also slipped 0.10 percent against the euro to $1.3606. It had strengthened to $1.3577 earlier on Monday after data showed German industrial output fell 1.8 percent on the month in May, its biggest drop in more than two years.
The weak German data kept alive expectations the European Central Bank may need to loosen monetary policy further in coming months in the face of disinflationary pressures and subdued economic growth.
The dollar index, which tracks the greenback against a broad basket of currencies, rose slightly to 80.253, down from an earlier high of 80.359, the highest in a week-and-a-half. (Editing by Meredith Mazzilli and Tom Brown)