* Euro jumps against dollar, yen, but on track for yearly losses
* Dollar index edges down, but still solidly up for the year
* Sterling on track for hefty loss for year marked by Brexit vote
* China's basket move puts weakening yuan in spotlight
TOKYO, Dec 30 (Reuters) - The euro jumped to its highest in three weeks in thin Asian trade on Friday, but was on track for a losing year on expectations that U.S. President-elect Donald Trump's policies will boost inflation and prompt the U.S. Federal Reserve to hike interest rates more frequently.
On the last trading day of 2016, the dollar index, which tracks the greenback against a basket of six major rivals, slipped 0.3 percent to 102.40, below its high of the year of 103.65 touched on Dec. 20, which was its highest level since January 2003. But it was still poised to gain 3.8 percent for the year.
The euro was last up 0.4 percent at $1.0527 after briefly spiking to $1.0700, its highest since Dec. 8. It was down 3 percent against the dollar for the year.
The euro also soared against the Japanese currency. It was up 0.6 percent at 122.99 yen after touching 123.87, its highest since Dec. 15, but remained on track to shed 5.8 percent for the year.
"It's a really thin market today, and suddenly offers disappeared and short-term players pushed the euro higher and took out stops. That's all," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The dollar clawed back lost ground against the yen to stand at 116.77 yen after earlier touching 116.05, its lowest since Dec. 14. The dollar was down 2.9 percent for the year against the yen, but considerably pared its losses after the Nov. 8 U.S. presidential election.
Trump's victory helped push U.S. Treasury yields to multi-year highs on expectations that his administration would embark on inflation-stoking stimulus policies, and the U.S. central bank would respond with more interest rate increases.
On Thursday, though, a strong U.S. 7-year note auction on the last full trading day of the year pushed down yields across the curve, undermining the dollar's appeal.
The U.S. bond market will close at 2 p.m. Friday in advance of the New Year's holiday weekend. Japanese markets will be closed Monday and Tuesday.
Sterling rose 0.1 percent to $1.2278, moving away from a two-month low of $1.2201 plumbed Wednesday. It was down 16.6 percent in a year marked by Britain's June vote to exit the European Union.
China's yuan looked set to end the year down around 7 percent against the resurgent dollar, making it the worst performing Asian currency of the year.
China will change the way it calculates a key yuan index in the new year, nearly doubling the number of foreign currencies in a basket that is used to set the yuan's value, its foreign exchange market operator said late on Thursday.
China has been promoting use of the index partly to divert attention from the yuan's value against the dollar which has fallen near its lowest in 8-1/2 years.
By adding another 11 currencies, China will reduce the dollar's weighting in the basket to 22.4 percent from 26.4 percent, according to currency strategists at Brown Brothers Harriman.
"Although the yuan is at an eight-year low against the dollar, it is near a four-month high against the current CFETS basket," they said.
Analysts said the change was in line with the central bank's intention to discourage investors from exclusively tracking the yuan's fluctuations against the dollar, but it would have limited impact on the Chinese currency, which is expected to weaken further against the dollar in 2017.
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Reporting by Tokyo markets team; Editing by Kim Coghill and Eric Meijer