* Dollar index dips, still up 1 percent for week
* Yellen speech later eyed for support of March rate hike
* Poll gain for Macron adds to support for euro
* Bulls worry why dollar has not gained more
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, March 3 The dollar stalled after two
days of strong gains on Friday, with nerves around a speech by
Federal Reserve chief Janet Yellen due later in the day adding
to factors that have held back a broader rally this year.
A poll showing centrist candidate Emmanuel Macron moving
ahead of far-right rival Marine Le Pen in first round voting
intentions also further eased nerves around April and May's
French presidential elections, prodding the euro higher.
The dollar is up around 1 percent this week, its fourth
straight weekly gain on the trot, but a sour January means it is
still well below highs hit on the back of optimism about the
shape of Donald Trump's presidency in December.
This week's driver has been a swing in market expectations
towards a rise in Federal Reserve interest rates on March 15.
Money markets have gone from giving that a less than 20
percent probability two weeks ago to around 80 percent on Friday
- yet the dollar is still short of even last month's highs
against the euro and yen.
"The developments are clearly supportive for the US dollar,
but it has strengthened only modestly so far," said Derek
Halpenny, head of global market research with Japan's MUFG in a
report listing nine reasons why the greenback was not rising
"One key factor we believe is the fact that the euro is
sitting around key technical support levels between $1.0400 and
$1.0500 with a number of key events risks on the immediate
Speeches from Fed Chair Janet Yellen and Vice Chair Stanley
Fischer on Friday are now widely expected to be the final piece
of the puzzle, along with next week's non-farm payrolls. In that
time, the market also has next Thursday's European Central Bank
meeting to contend with.
Halpenny and others also list nerves ranging from the lack
of a substantial rise in longer-term U.S. Treasury yields to
worries that Trump will not deliver on promised stimulus and tax
reform as holding the dollar back.
The greenback fell a third of a percent against the basket
of currencies used to measure its broader strength in morning
trade in Europe.
It fell by more than half a percent against the euro, to
$1.0564, after the new poll and the withdrawal of
support of one party for another Macron rival, Francois Fillon.
The Australian and New Zealand dollars have been among the
biggest losers against their U.S. counterpart, and they were
both lower still on Friday, underperforming other major pairs.
That pointed to some underlying concern both over what more
aggressive rises in U.S. interest rates will do to global
demand, finances and the Chinese yuan.
"People were not expecting the Fed to move in March, so last
month they were putting on more (interest rate) carry trades in
these currencies," said Bank of Montreal head of European FX
strategy Stephen Gallo. "That is clearly coming off."
The Aussie was down 0.1 percent on the day at $0.7564
, having touched lows of $0.7543, its weakest since Jan.
31. A more than 1 percent fall for the week is its worst
performance since mid-December. The kiwi dollar was also down
half a percent at $0.7026.
After poor Australian trade data on Thursday, some dealers
pointed to a 5.5 point fall in the AIG performance of services
index to below the 50-point line that points to a contraction.
"The Australian Dollar had been a clear outperformer in 2017
into this week, but could face more headwinds going forward if
the Fed actually follows through," analysts from London-based
currencies exchange LMAX said in a morning note.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Writing by Patrick Graham; Editing by Dominic Evans)