* G3 currencies subdued, recovering from bout of risk aversion
* Ukraine and Gaza still dominating headlines
* Holiday in Japan seen keeping markets quiet
By Ian Chua
SYDNEY, July 21 (Reuters) - The dollar got off to a steady start on Monday as some calm returned to markets following an initial bout of risk aversion stemming from a flare up in geopolitical tensions.
The downing of a Malaysian airliner in eastern Ukraine last week and fighting in Gaza still dominated the headlines, but developments over the weekend did not bring any fresh jitters.
The dollar index was unchanged at 80.513, having retreated from a one-month peak last Friday when the euro bounced off a five-month trough of $1.3491.
Traders said buying interest below $1.3500 helped squeeze the euro higher. The common currency should see solid support at $1.3460/80, an area that had provided a floor on several occasions in the past 10 months or so.
The calmer market mood kept the safe-haven yen pinned down. The greenback was at 101.35 after rebounding from a one-week low of 101.09. The euro stood at 137.14 yen, off a five-month trough of 136.71.
“Our sense remains that at least for the moment, markets will likely continue to treat geopolitical events as localized risks and not ”macro“ destabilising events,” analysts at JPMorgan wrote in a note to clients.
The Antipodean currencies also recovered some of their recent losses, with the New Zealand dollar briefly popping above 87 U.S. cents in early trade from Friday’s low of $0.8649.
New Zealand’s central bank is widely expected to lift its cash rate to a 5-1/2 year high of 3.5 percent on Thursday, but some analysts suspect the central bank will signal a pause to the tightening cycle.
With Japanese financial markets closed on Monday for a public holiday, traders suspect the major currencies will traipse in a narrow range. There is no key economic data out of Asia. (Editing by Shri Navaratnam)