* Growth-linked currencies dip on China demand concerns
* Investors eye Italy reform talks
By Julie Haviv
NEW YORK, March 20 (Reuters) - The dollar gained against major currencies o n T uesday while growth-linked currencies slumped as concerns about China's growth sent investors scurrying to the safety of the greenback.
Global miner BHP Billiton said it saw signs growth in iron ore demand was flattening in China, Australia's single biggest export market, pushing the Australian dollar down more than 1 percent.
"Investors are snapping up U.S. dollars this morning and the rally has all the characteristics of a safe haven bid," said Kathy Lien, director of currency research at GFT Forex in Jersey City, New Jersey.
Renewed concerns about China, the world's second largest economy after the United States, had investors favoring the dollar.
"Throughout the global financial crisis, China did the heavy lifting for Asia and the rest of the world," Lien said. "Although the U.S. economy is improving, unfortunately we do not think that the U.S. has what it takes to offset slower growth in China."
The euro last traded at $1.3198, down 0.3 percent on the day, slipping away from a one-week high near $1.3266 hit on Monday, with support at the 100-day moving average around $1.3199.
The EUR/USD $1.31-1.33 range should remain intact for the time being, Lien said.
Against the U.S. dollar, the Australian dollar last traded at 1.0482, down 1.2 percent on the day, while the New Zealand dollar slumped 1.2 percent to 0.8164.
The Australian dollar's plunge sent it closer to key technical support at the 200-day simple moving average of $1.0401 while the 100-day SMA lies at $1.0370.
A recent surge in U.S. Treasury yields is likely behind the sudden breakdown in the correlation between the Australia dollar and U.S. dollar and the S&P 500 stock index, according to David Rodriguez, quantitative strategist at DailyFX in New York.
The currency pair is trading near the middle of its year-to-date range while the S&P 500 index had recent hit its highest since the global financial crisis in 2008.
"The clear disconnect suggests the correlation may have broken down," Rodriguez said. ""Yet the Aussie dollar continues to offer a substantial yield advantage to its US namesake, and this may ultimately be the most important driver of AUDUSD moves for the foreseeable future."
The dollar index rose 0.4 percent to 79.776, recovering from a one-week low hit the previous day. Analysts said much of the greenback's recent surge was due to improving U.S. data and a modest brightening of the U.S. Federal Reserve's economic outlook in its latest policy statement.
That spurred a rise in U.S. Treasury yields as investors scaled back expectations of further quantitative easing in the near term, and prompted some speculation the Fed may tighten monetary policy earlier than it had pledged.
The 10-year U.S. Treasury yield rose to as high as 2.392 percent on Monday, its highest since late October. The two-year Treasury yield was last trading at roughly 0.379 percent, in sight of last week's peak of 0.414 percent which was the highest since late July.
But some strategists said the move in the greenback and U.S. Treasury yields could soon run out of steam.
"The recent dollar rally has been based on unrealistic expectations for U.S. rates and I don't think it is well founded," said Adam Cole, global head of FX strategy at RBC Capital Markets, "The market is priced for rate hikes much earlier than the FOMC (Federal Open Market Committee) has indicated."
Moves in the dollar versus the yen picked up in European trade after a quiet Asian session when Japanese financial markets were closed for a national holiday.
The dollar rose 0.4 percent to 83.66 yen, moving back toward an 11-month high of 84.187 hit last Thursday on trading platform EBS, while the yen hit a fresh four-month low versus the euro of 110.82 yen.