* Dollar slips after rally from 3-year lows fades
* Dollar index still on track to gain 0.7 pct on the week
* Japan’s Jan inflation pace unchanged, yen shows little reaction
By Shinichi Saoshiro
TOKYO, Feb 23 (Reuters) - The dollar sagged broadly on Friday after its recovery this week faded as U.S. Treasury yields declined from their recent peaks.
The dollar index against a basket of six major currencies was little changed at 89.815.
The index had reached a 10-day high of 90.235 on Thursday, from a three-year trough of 88.253 late last week, before its rally ran out of steam. It was on still on track to gain 0.7 percent on the week.
“The dollar had been gaining for the past few days, and it was time for some selling to emerge as long-term U.S. yields pulled back with Treasuries finding some bids,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
Benchmark 10-year note yields were last yielding 2.926 percent, after rising to a four-year high of 2.957 percent on Wednesday.
The euro was little changed at $1.2327 after gaining 0.4 percent the previous day. The common currency has lost 0.75 percent so far this week, following its ascent to a three-year top of $1.2556 on Feb. 16.
The dollar was steady at 106.825 yen after dropping nearly 1 percent overnight, when it was jerked back from a high just below 108.00 scaled mid-week.
“U.S. yields may have declined a little bit but caution towards their recent rise and their negative impact on equities linger,” Ishikawa at IG Securities said. “The yen will attract demand under such conditions.”
The yen tends to be bought in times of market volatility, thanks to its perceived status as a safe haven currency.
Wall Street shares ended Thursday mixed, with the Dow adding 0.66 percent, the S&P 500 edging up 0.1 percent and the Nasdaq shedding 0.1 percent.
On Feb. 16, when the steady rise in U.S. yields triggered volatility in the broader equity market. the dollar touched a 15-month low of 105.545 yen.
The yen showed little reaction to data which showed Japan’s annual core consumer inflation rate unchanged in January from the previous month, suggesting the Bank of Japan remains distant from exiting its super loose monetary policy.
Japan’s nationwide core consumer price index, which includes oil products but excludes volatile fresh food costs, rose 0.9 percent in January. The pace remained far from the BOJ’s 2 percent inflation target.
The pound was a shade lower at $1.3949 following overnight gains of 0.3 percent. Sterling was en route for a weekly loss of about 0.5 percent.
The Australian dollar dipped 0.1 percent to $0.7839 after gaining 0.5 percent the previous day. The Aussie was on track for a loss of 0.85 percent this week. (Reporting by Shinichi Saoshiro; Editing by Richard Borsuk)