* Dollar index hits six-day high
* U.S. Treasury auctions seen as test of investors' appetite (Updates throughout to U.S. market open, changes dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Feb 20 (Reuters) - The dollar rose to a six-day high against a basket of major currencies on Tuesday, extending a rebound from a three-year low last week, as investors shrugged off worries about the U.S budget deficit and focused on large U.S. government debt auctions this week.
The U.S. Treasury is preparing to sell more than $250 billion worth of new debt this week, which analysts said would be a key gauge of international investors' appetite for U.S. assets. The dollar has sold off in recent months on worries that the Trump administration's recently passed tax cuts and plans for large government spending would balloon the deficit.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.61 percent at 89.646.
The dollar was up 0.52 percent against the Japanese yen and the euro slipped 0.51 percent against the greenback.
"I think, right now, what we are seeing is just a little bit of profit-taking (in other currencies), a little bit of bargain-hunting," said Omer Esiner, chief market strategist with Commonwealth Foreign Exchange in Washington.
"I hesitate to say sentiment is meaningfully changing at this point, until we start to see a little bit more evidence of some of the negative factors starting to abate," he said.
The dollar has been in a steep decline since the start of 2017, with any positive impetus from rising U.S. interest rates offset by a barrage of bearish factors in recent months, including worries about the deficit, concerns the U.S. government is pursuing a weak dollar strategy, and moves by other central banks to tighten monetary policy.
Traders are focused on this week's heavy supply of U.S. government debt, which will kick off on Tuesday when $179 billion in Treasury bills and two-year notes will be auctioned.
"Given the focus on the deficit, the dependence on foreign investment, I think we will have to see relatively strong demand at these auctions," Esiner said.
"If you start to see waning demand for U.S. assets by foreign investors, that speaks directly to some of the issues that are weighing on the U.S. dollar," he said.
Sterling rebounded against the euro after a media report said the European Parliament would call for giving Britain "privileged" single-market access.
Bitcoin hit more than a three-week high on the Luxembourg-based Bitstamp exchange and was up 2.5 percent at $11,451.91.
"With the cryptocurrency securing a solid weekly close above the psychological $10,000 level, speculation may heighten over bitcoin bulls re-entering the scene," Lukman Otunuga, research analyst at futures brokerage FXTM in London, said in a note.
Reporting by Saqib Iqbal Ahmed; Editing by Paul Simao