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FOREX-Dollar trades above multi-week lows before Fed meeting

* Fed meeting awaited

* Yen unmoved after BoJ meeting

* Graphic: World FX rates tmsnrt.rs/2RBWI5E

LONDON, April 27 (Reuters) - The dollar hovered above multi-week lows versus major peers on Tuesday, weighed by subdued Treasury yields ahead of the Federal Reserve’s policy decision this week, while the yen hardly budged after the Bank of Japan kept its policy on hold.

The safe-haven greenback was largely out of favour after world stocks started the week hitting a record high, although a slight pullback in world stock markets on Tuesday helped keep it above the recent lows.

Trading in currencies was largely subdued, ahead of this week’s Federal Reserve two-day meeting ending on Wednesday, where no change to policy is expected.

However, the market will pay close attention to comments from Fed Chairman Jerome Powell, who is likely to face questions over whether improving conditions warrant a withdrawal of monetary easing.

Most analysts, though, expect him to say such talk is premature, which could put downward pressure on Treasury yields and the dollar.

“By keeping nominal and real U.S. Treasury yields subdued the Fed is taking away the edge that the dollar would otherwise have thanks to the superior performance of the U.S. economy,” said Valentin Marinov, head of G10 FX research at Credit Agricole.

“This is also allowing investors to focus on dollar-negatives like President Biden’s tax proposals and the U.S. external imbalances and thus levelling the playing field between the dollar and other currencies.”

The dollar index, which tracks the U.S. currency against six peers, was flat at 90.889 in the London morning session, after dipping to the lowest since March 3 overnight at 90.679.

The dollar added 0.2% to 108.34 yen, another haven currency, continuing its rise from the seven-week low of 107.48 reached Friday.

The yen showed a muted response after the Bank of Japan kept its monetary policy on hold as widely expected.

“The reflation trade is back on,” Gavin Friend, a strategist at National Australia Bank, said on a client podcast.

“Currencies outside of the dollar should be doing quite well anyway in that environment.”

The dollar has fallen nearly 3% since late March as U.S. Treasury yields traded in narrow ranges after retreating from a 14-month high of 1.7760%, slashing the currency’s yield appeal.

The benchmark 10-year Treasury yield was around 1.58% on Tuesday, tracking sideways since sliding to a one-month low of 1.528% in the middle of this month.

The euro slipped 0.1% to $1.2078, but remained close to the two-month high of $1.2117 reached Monday.

The commodity-linked Australian dollar, a barometer of risk appetite, eased 0.3% to $0.7778, after a 0.7% rally overnight that took it just shy of a five-week peak.

The offshore Chinese yuan retreated 0.1% after rising to a seven-week top of 6.4710 per dollar on Monday.

In cryptocurrencies, bitcoin hit $55,000 following a 10% surge on Monday, driven by reports that JPMorgan Chase is planning to offer a managed bitcoin fund.

That snapped a five-day losing streak which took the digital token to the cusp of $47,000, with losses accelerating amid worries about U.S. President Joe Biden’s plan to raise capital gains taxes.

Reporting by Ritvik Carvalho; additional reporting by Kevin Buckland and Hideyuki Sano in Tokyo, editing by Ed Osmond, William Maclean

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