(Removes extraneous word from opening paragraph)
* MSCI Asia-Pacific index edges lower
* European stocks dip overnight, US markets closed Mon for holiday
* Crude reaches 2-wk highs amid Middle East tensions, gold steady
By Shinichi Saoshiro
TOKYO, Feb 20 (Reuters) - Asian stocks dipped on Tuesday, their recent recovery slowing after European equities broke a winning streak, while the dollar held firm after bouncing from three-year lows.
MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent. Australian stocks dipped 0.45 percent.
Japan's Nikkei shed 0.4 percent after three successive days of gains.
The pan-European STOXX index fell 0.6 percent on Monday following three days of large gains, dragged down by falls in consumer staples stocks.
The U.S. markets were closed on Monday for a holiday, leaving Asia short of the usual leads, with the focus on whether Wall Street could continue its recovery once trading resumed.
The Dow gained 4.5 percent last week, winning back more than half of the territory lost during a sharp downturn earlier in the month that rocked the global markets.
"U.S. stocks will be watched after their holiday because whether other markets can continue their recovery depends to a large degree on how U.S. stocks perform," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
"Volatility will also have to keep settling for the broader recovery to continue," he said.
The VIX index - Wall Street's "fear gauge" measure of market volatility - has slipped below 20, less than half the 50-point peak touched earlier in February.
The dollar index against a basket of six major currencies was little changed at 89.239 after gaining for a second session overnight, during which it pulled back from a three-year low of 88.253.
The dollar was steady at 106.640 yen and the euro was effectively flat, at $1.2402.
Oil prices hovered near two-week highs, lifted by tensions in the Middle East after Israeli Prime Minister Benjamin Netanyahu said on Sunday that Israel could act against Iran itself, not just its allies in the region.
U.S. crude futures rose 1.3 percent to $62.48 per barrel after touching $62.57, the highest since Feb. 7.
Spot gold was little changed at $1,346.50 an ounce, after it was nudged off the three-week peak of 1,361.76 it scaled last week when the dollar rebounded from three-year lows.
Reporting by Shinichi Saoshiro; Editing by Eric Meijer