* Dollar rises broadly, helped by rise in U.S. yields
* Growth-linked currencies dip on China demand concerns
* Investors eye Italy reform talks
By Nia Williams
LONDON, March 20 (Reuters) - The dollar index climbed against a basket of currencies on Tuesday, helped by higher U.S. Treasury yields, while growth-linked currencies came under pressure from concerns China's demand for raw materials could be slowing.
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 more than 1 percent lower on the day to $1.0488.
"The (U.S.) dollar looks better bid against the euro and the yen. Interest rate expectations do seem to be gaining a bit more traction on the currency," said Daragh Maher, currency strategist at HSBC.
"But it strikes me the move in the Australian dollar may be a bit overdone. I would think it's a good idea to buy Aussie on these dips."
The dollar index rose 0.3 percent to 79.692, 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 level since late October. The two-year Treasury yield was last trading at roughly 0.367 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."
The euro eased 0.3 percent to $1.3196, slipping away from a one-week high near $1.3266 hit on Monday and below support from the 100-day moving average around $1.3199.
Some investors were cautious about pushing the shared currency higher ahead of talks between Italy's government and unions on reforms seen as key to turning around the euro zone's third largest economy and paying down massive debts.
There have been some signs of stabilisation in the euro zone sovereign bond market this year, with the 10-year Italian government bond yield spread over German Bunds standing at 286 basis points on Tuesday, down from 535 basis points on Jan. 9.
But concerns remained that Portugal may eventually need to restructure its debt like Greece, prompting another flare up in the crisis, while Italy is potentially a far bigger worry.
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 83.73 yen, moving back towards an 11-month high of 84.187 hit on Thursday on trading platform EBS, while the yen hit a fresh four-month low versus the euro of 110.82 yen.