* Dollar index off 2-wk lows but capped by lingering trade woes
* Euro weighed down ahead of Italian govt bond auctions
* Aussie dips back towards 13-mth lows (Updates throughout)
By Shinichi Saoshiro
TOKYO, June 27 (Reuters) - The dollar held steady against a basket of currencies on Wednesday, its earlier bounce from two-week lows flagging amid lingering trade conflict concerns.
The dollar index against a basket of six major currencies was steady at 94.652 after gaining 0.4 percent overnight to snap a four-session losing run.
While a modest easing in concerns over an escalating trade row between the United States and its trade partners had lifted the dollar off a two-week trough of 94.171, wariness lingered and capped the dollar.
Underlining investor caution, equity markets in Asia extended losses and slipped across the board on Wednesday.
“The spat is beginning to have an actual impact on corporate behaviour and this is the difference from the earlier stages of the trade row,” said Koji Fukaya, president at FPG Securities in Tokyo.
“The ‘risk off’ trend has started to impact corporations in the developed markets, clouding the outlook for their economies and suppressing dollar demand.”
The dollar was 0.1 percent lower at 109.92 yen, after going as high as 110.23 on Tuesday. The yen is often sought in times of market turmoil and political tensions.
“The dollar lacks guidance from U.S. yields, which have been directionless. Furthermore, it is difficult to gauge whether the Trump administration is poised to become even more conservative towards trade issues or if it wants to ease its stance,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
The 10-year U.S. Treasury note yield was unchanged at 2.882 percent. The yield has been confined in June to a 15 basis point range after fluctuating by nearly 40 basis points in May, during which it touched a seven-year high of 3.128 percent.
The euro was a shade higher at $1.1657 after losing 0.5 percent overnight, when a rise in Italian bond yields ahead of debt auctions later this week soured sentiment towards the single currency.
Italy will sell five- and 10-year bonds on Thursday, with the auctions seen as a test of investor appetite for the country’s debt following the political turmoil that gripped Rome last month.
Sterling was effectively flat at $1.3224.
The pound had dropped 0.45 percent on Tuesday after an incoming Bank of England policymaker expressed caution over Britain’s readiness for higher interest rates and uncertainty over the impact of Brexit on the economy.
The trade-sensitive Australian dollar was down 0.25 percent at $0.7371, edging back towards a 13-month low of $0.7345 plumbed last week.
The Chinese yuan slipped to a new six-month low of 6.615 per dollar after the People’s Bank of China (PBOC) lowered the currency’s midpoint for the sixth straight day to its weakest in six months.
The yuan had slumped on Tuesday on expectations that Beijing will let the currency weaken further to soften the impact of trade tariffs imposed by the United States. (Editing by Shri Navaratnam and Eric Meijer)