* Dollar index hovers near 1-week low
* Recent rises in U.S. yields signal support for dollar
* Support for dollar index at 100-day MA near 79.30
* Tokyo markets closed on Tuesday for a holiday
By Masayuki Kitano
SINGAPORE, March 20 (Reuters) - The dollar hovered near a one-week low against a basket of currencies on Tuesday, but recent signs of improvement in the U.S. economy and rises in U.S. Treasury yields were seen likely to lend the greenback some support.
The dollar index stood at 79.449, having regained a bit of ground after dipping to 79.354 on Monday, its lowest level since March 9. One possible support lies near 79.30, the 100-day moving average.
“I don’t expect to see the dollar pull back significantly,” said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong. “It’s probably going to be a consolidation week for the U.S. dollar,” he added.
The euro held steady at $1.3240, having climbed to a one-week high near $1.3266 at one point on Monday.
Market players said there were no obvious reasons behind the dollar’s drop and the euro’s rise on Monday, although there was some market chatter about news that United Parcel Service Inc will buy Dutch peer TNT Express for 5.2 billion euros ($6.85 billion).
In any event, the euro could be vulnerable against the dollar in the near term, given the diverging outlooks for the U.S. and euro zone economies, said Rob Ryan, FX strategist for BNP Paribas in Singapore.
“I think the (euro‘s) downside is probably a little more vulnerable because of the continued improvement in the U.S. data,” Ryan said.
A recent improvement in U.S. economic data coupled with a modest brightening of the U.S. Federal Reserve’s economic outlook in its policy statement last week, prompted investors to scale back expectations of further monetary easing in the near term, helping spur a rise in U.S. Treasury yields.
The 10-year U.S. Treasury yield rose to as high as 2.392 percent on Monday, its highest level since late October.
Given this backdrop, the dollar looks likely to be supported against the yen as long as forthcoming U.S. economic data doesn’t disappoint, said Ryan at BNP Paribas.
“As long as they come in roughly as expected, then I think that the dollar strength against the yen can be maintained and dollar/yen will continue to drift up,” he said.
The dollar held steady against the yen near 83.38 yen . The dollar has taken a breather after hitting an 11-month high of 84.187 yen on trading platform EBS on Thursday.
The yen has come under broad pressure over the past month after the Bank of Japan’s surprise monetary easing in mid-February.
Trading in the yen is likely to be less active than usual, with Japanese financial markets closed on Tuesday for a national holiday.