* Euro and sterling slip but off lows hit on Monday
* Focus on if rise in U.S. short-term yields will persist
* US yield rise on talk of Fed rate rise this year helps dlr
* Dollar/yen, euro/yen dip on selling by Japanese players
By Masayuki Kitano
TOKYO, June 9 (Reuters) - The dollar was steady against a
basket of currencies on Tuesday, staying below a two-week high
scaled after U.S. jobs data last week stoked expectations for a
Federal Reserve rate rise later this year.
The euro faced some selling pressure after the Wall Street
Journal reported on its website that the United States is likely
to press European countries to put their banks through more
rigorous public stress tests. []
Data last week showed the pace of U.S. job losses slowed
sharply in May, sparking talk that the Federal Reserve may raise
rates later this year and boosting the dollar. []
Traders said they were focusing on economic indicators and
upcoming auctions for U.S. debt that could underscore this shift
in market sentiment.
"I would say investors are trying to grasp how the market
will move after U.S. Treasury auctions and economic data," said
Yoshihisa Kanzaki, a currency dealer at Shinkin Central Bank.
There will be an auction of three-year U.S. Treasury notes
later in the day and auctions of 10-year and 30-year U.S.
Treasuries later in the week.
The dollar index, which measures the dollar's value against a
basket of six major currencies, was steady at 80.770 <.DXY>,
having retreated from Monday's high of 81.466, the highest since
May 20.
U.S. two-year yields stood at 1.378 percent <US2YT=RR>, after
rising above 1.4 percent on Monday for the first time in seven
months.
On Friday, U.S. short-term interest rate futures, which track
market expectations for Fed rate policy, had their first
meaningful move in months -- bringing forward the possible timing
of a Fed rate hike to late 2009 from early 2010.
The euro dipped 0.1 percent to $1.3889 <EUR=>, after falling
to $1.3853 earlier in the day.
The euro had fallen on Monday to its lowest since late May of
$1.3806 on trading platform EBS, after ratings agency Standard &
Poor's cut Ireland's sovereign credit rating to AA, its second
downgrade in three months. []
Sterling was steady at $1.6051 <GBP=D4>. It was well off
Monday's low of $1.5803, hit when support for Prime Minister
Gordon Brown's ruling Labour Party in European parliament
elections on Sunday plunged to its lowest level in a century,
adding to uncertainty about his political future. []
The yen rose broadly, with the euro slipping 0.6 percent to
136.15 yen <EURJPY=R>.
The dollar fell 0.5 percent to 98.06 yen <JPY=>, pulling back
from a one-month high of 98.90 yen hit on EBS on Friday.
Traders said the dollar dipped against the yen due to selling
by Japanese exporters, while the euro fell versus the yen on
selling by Japanese institutional investors.
The strength of investor risk appetite is also in focus
following a three-month rally in global equities as hopes grew
that the worst of the global recession may be over.
The recovery in risk appetite eroded safe-haven demand for
the dollar and helped push the dollar index down to a low of
78.334 last week, the lowest since last December.
Market players have taken comfort from signs that economic
activity around the world has stopped worsening, but the absolute
level is still low, said Kimihiko Tomita, head of foreign
exchange for State Street Global Markets in Tokyo.
"Financial markets have jumped the gun and are tilted in the
direction of taking risk," Tomita said.
"But now there may be a bit of a question mark about whether
it is OK to continue with such moves, that this may not be
advisable unless the real economy follows along," Tomita said.
(Additional reporting by Kaori Kaneko; Editing by Edwina Gibbs)
