* Weak U.S. data keeps pressure on U.S. Treasury yields
* Dollar index wallows near 7-week lows
* Aussie still firm despite disappointing jobs data
By Lisa Twaronite
TOKYO, Oct 15 (Reuters) - The dollar wallowed around seven-week lows against a basket of currencies in Asian trading on Thursday, after weak U.S. sales data prompted investors to scale back bets that the U.S. Federal Reserve would hike interest rates by the end of 2015.
The dollar index was last nearly flat from late U.S. levels at 93.945, after tumbling as low as 93.845, its lowest since Aug. 26.
The euro stood at $1.1479 after edging up as high as $1.1491 earlier, its highest since Aug. 26.
U.S. retail sales barely rose in September, edging up only 0.1 percent and falling short of expectations for a 0.2 percent rise, according to a Reuters poll of economists. Producer prices recorded their biggest decline in eight months.
Against its Japanese counterpart, the dollar fell as low as 118.61 yen, its lowest since Sept. 7, and was last trading at 118.98 yen.
The yen’s overnight gains were held in check by speculation that the Bank of Japan might take further stimulus steps to bolster the flagging economic recovery.
Japanese manufacturers’ confidence worsened for the second straight month and is expected to fade further, a Reuters poll showed, adding to lingering fears of a recession and keeping pressure on policymakers to offer support.
“People don’t want to touch the dollar yen,” for big directional bets, said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The pair remained solidly mired in its familiar range, between 118-121 yen in which it has traded since late August.
The disappointing U.S. sales data on Wednesday increased demand for the safety of U.S. Treasuries, pressuring yields and further sapping the dollar’s appeal.
The yield on benchmark 10-year Treasury notes was at 1.992 percent in Asian trading, not far from its U.S. close of 1.982 percent on Wednesday.
Also on Wednesday, the Fed’s Beige Book showed the U.S. economy grew at a modest pace, keeping alive hopes that the U.S. central bank is on track to eventually raise interest rates for the first time since 2006.
U.S. interest rates futures implied traders see about a 1-in-4 chance the Fed would raise rates by year-end, according to CME Group’s FedWatch program. The U.S. central bank will hold two more policy meetings in 2015, on Oct. 27-28 and Dec. 15-16.
The Fed opted to hold policy steady last month as policymakers fretted that a slowing global economy, particularly China, might threaten the U.S. economic outlook. Figures released on Wednesday showed the pace of China’s consumer inflation slowed.
The Australian dollar was up 0.6 percent at $0.7344 after briefly blipping lower earlier on downbeat employment figures.
The data showed a fall of 5,1000 in jobs in September against forecasts for a gain of 5,000.
The Reserve Bank of Australia (RBA) is still expected to keep rates at a record low of 2.0 percent at its next meeting on Nov. 3. (Editing by Kim Coghill; Editing by Simon Cameron-Moore)