Dollar steadies after slip, yen stays weak

TOKYO, June 5 (Reuters) The dollar was little changed on Tuesday following a slide in the previous session and hovered within range of a 4 1/2-year high against the yen as investors continued to dump the yen for currencies with higher yields.

The dollar slipped on Monday after investors booked profits.

It was unable to maintain a four-month high against the yen and a two-month peak versus the euro hit late last week after strong U.S. jobs data made it less likely the Federal Reserve will cut rates this year.

Traders said the dollar would continue to suffer against the euro given that euro rates are seen rising this week, but the yen would keep sliding as market participants shun it due to Japan's paltry 0.5 percent yield.

''It may take some time ... but ultimately, yen selling is bound to continue,'' said Takehiko Jimbo, forex manager at Mitsubishi UFJ Trust and Banking.

The dollar was little changed at 121.65 yen after slipping to 121.55 yen in the previous session and edging away from 122.14 yen touched late last week for the first time since late January.

Traders said despite the dollar's slip it was only a matter of time before it made a sustained climb above 122.00 and rises beyond the psychologically crucial 122.20 yen level, which would be its highest since December 2002.

The euro was unchanged at $1.3490 pulling away from a two-month low of $1.3392 hit last week. It was at 164.15 yen near a record high of 164.36 yen hit on Monday on electronic trading platform EBS.

Traders said the market would be on the lookout for movements in Chinese stocks after the Shanghai Composite tumbled more than 8 percent on Monday.

So far, global equities have managed to largely shrug off recent losses in Chinese equities.

Market participants are also awaiting a rate announcement by the European Central Bank on Wednesday, when it is widely expected to lift rates from 3.75 percent. Traders will be waiting to see if the ECB signals more rises to come, which would further boost the euro.

The Reserve Bank of Australia will also make a decision on rates on Wednesday, while the Bank of England and the Reserve Bank of New Zealand will issues policy statements on Thursday.

All three central banks are seen holding rates steady this week, but market participants expect they will maintain rate-tightening biases in the near future.

REUTERS DH BST0605