* Sterling outperforms, other pairs stick to ranges
* Carney tells Sunday Times UK rates may rise before pay recovers
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, Aug 18 (Reuters) - The dollar edged down against a basket of currencies on Monday, as U.S. Treasury yields wallowed close to 16-month lows and made the greenback less attractive.
Sterling rose after the Bank of England indicated that UK interest rates may have to rise even before wage growth recovers, backtracking from earlier comments that prompted markets to push out the risk of a rate hike.
But the U.S. dollar, euro and yen were little changed from their levels late in New York on Friday, where heightened tensions in Ukraine drove global bond yields to fresh lows.
The euro last traded at $1.3397, flat on the day and well within a slim $1.3333-$1.3445 range seen so far this month. Against the yen, the common currency edged down slightly to 136.05.
The greenback bought 102.32 yen, slightly down from Friday but still roughly in the middle of this month’s 101.51-103.05 range.
The dollar index, which tracks the U.S. unit against a basket of rivals, edged down to 81.414.
“Just looking at the dollar index, we dipped down below what I see as a key level of 81 and a half, and we’re starting off the week below there,” said Bart Wakabayashi, head of currencies at State Street in Tokyo.
“It’s very hard to judge, with thin summer markets, but it should be a bearish sign for more dollar retracement,” he said.
The latest data from the Commodity Futures Trading Commission released on Friday showed that speculators reduced bullish bets on the U.S. dollar in the week ended Aug. 12, after net longs had hit a more than one-year high in the previous week. Net longs declined for the first time in four weeks.
U.S. Treasury yields remained close to recent lows, with the yield on the benchmark 10-year U.S. Treasury note at 2.357 percent in Asia. That was not far from its U.S. close of 2.345 percent on Friday, when it dropped as low as 2.30 percent, its lowest since June 2013.
Dollar investors remained cautious ahead of a gathering of top central bankers at the Federal Reserve’s annual Jackson Hole symposium starting on Thursday, at which Janet Yellen will speak on Friday in her first appearance at the retreat as head of the central bank.
“Historically, trading leading into Jackson Hole sees increased volatility,” noted Evan Lucas, strategist at IG in Melbourne.
“Talk so far is that chairperson Yellen is concentrating on employment and the composition of wage growth and full-time versus part-time percentages; this issue is likely to be echoed by central bankers around the world as global employment remains soft at best.”
Risk appetite remained slack as investors also monitored events in the Ukraine, as Kiev and Western governments waited to see if Russia would intervene in support of the increasingly besieged rebels.
Sterling rose as high as $1.6739, from around $1.6689 late in New York on Friday, and was last up about 0.3 percent at $1.6728. It also firmed against the euro, which dipped about 0.3 percent to 80.06 pence.
Last week, the pound plumbed a four-month trough of $1.6657 after the BOE slashed its forecast for wage growth and stressed that any interest rate hike would depend largely on an improved outlook for pay.
But in an interview with the Sunday Times, Governor Mark Carney said he would not have to wait for real wages to turn positive before raising rates.
Carney, however, has wrong-footed markets before, and sterling bulls appeared to be taking his latest comments with a grain of salt, capping the upside.
The Australian dollar edged up to $0.9319, having slowly recovered from a dip to $0.9239 earlier in the month.
The key event this week for Aussie bulls is Reserve Bank of Australia Governor Glenn Stevens’ twice-yearly parliamentary testimony on Wednesday.
Traders, however, expect no fireworks from Stevens, who is likely to reaffirm the central bank’s steady policy outlook.
On the data front, surveys on manufacturing activity in China and Europe as well as UK inflation and retail sales will be closely watched this week. (Editing by Shri Navaratnam and Jacqueline Wong)