March 3, 2017 / 5:30 AM / 6 months ago

FOREX-Dollar slips but poised for winning week on March Fed rate hike bets

* Higher U.S. Treasury yields bolster greenback

* Fed's Yellen, Fischer slated to speak later Friday

* Aussie licks wounds, on track for weekly drop

TOKYO, March 3 (Reuters) - The dollar slipped on Friday but remained on track for a solid weekly gain on growing expectations the U.S. Federal Reserve will raise interest rates at its mid-March meeting, which led to a rise in U.S. Treasury yields.

The dollar index, which gauges the greenback against a basket of six major currencies, was down 0.2 percent at 102.020 but not far from the previous session's high of 102.260, its loftiest peak since Jan. 11. For the week, it was up 0.9 percent.

Against the yen, the dollar fell 0.3 percent on the day to 114.11 after scaling a peak of 114.595 in the previous session, its highest since Feb. 15. The dollar was up nearly 2 percent for the week.

"There were some investors who weren't positioned for the possibility of a rate increase this month, and the dollar is benefiting as they adjust their expectations," said Mitsuo Imaizumi, the Tokyo-based chief foreign-exchange strategist for Daiwa Securities.

Comments this week from New York Fed President William Dudley as well as San Francisco Fed President John Williams buoyed dollar bulls, and prompted more investors to increase their bets on a rate increase as early as this month.

Fed funds futures on Thursday implied traders saw a 79.7 percent probability of a Fed rate hike at its March 14-15 policy meeting, up from 66.4 percent on Wednesday, according to data from CME Group's FedWatch program. That helped push up yields on U.S. two-year notes, which are considered most vulnerable to Fed rate hikes, to their highest since August 2009.

Fed Chair Janet Yellen as well as Vice Chair Stanley Fischer are slated to speak later on Friday, and could reinforce the hawkish message.

"We also changed our own expectations for a rate increase to March, from June," said Harumi Taguchi, principal economist at IHS Markit in Tokyo.

"But still, we don't know how U.S policy will continue, and there are also political risks, which could possibly change the trend back to a stronger yen," she said.

The euro edged up 0.1 percent to $1.0520, after dipping as low as $1.0495 overnight, within a tick of its lowest level since Jan. 11. It was down 0.4 percent for the week.

The Australian dollar licked its wounds, down 0.2 percent on the day at $0.7559. It skidded as low as $0.7543, the weakest since Jan. 31, as it came under pressure from slumping oil prices and the broadly stronger U.S. currency.

The Aussie was down 1.4 percent for the week, set for its worst weekly performance since mid-December.

Sterling was steady on the day at $1.2267 after plumbing a low of $1.2243 on Thursday, its nadir since Jan. 17. (Reporting by Tokyo markets team; Editing by Shri Navaratnam and Richard Borsuk)

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