Dollar holds gain vs euro as U.S. yields jump

TOKYO, June 13 (Reuters) The dollar hovered near an 11-week high against the euro on Wednesday as US bond yields rose to five-year highs, while the yen was supported by worries about a decline in investor risk appetite.

The yield on the benchmark 10-year U.S. Treasury note jumped to 5.31 percent on Wednesday after climbing on Tuesday on views that strong global demand could prompt central banks to raise interest rates and due to relentless selling by mortgage players.

The jump in bond yields lured investors away from the euro and towards the dollar, traders said.

The euro also fell against the yen as the jump in bond yields pushed U.S. shares lower and prompted some investors to cut risky positions, said a trader for a Japanese bank.

''Yields rose and the Dow fell, spurring some risk-reduction type selling of euros against the yen,'' the trader said.

The yen could extend gains against higher-yielding currencies such as the euro if Chinese or Japanese shares fall on Wednesday, he said.

The euro stood at $1.3302 as of 2339 GMT. It earlier dipped as low as $1.3301 on electronic trading platform EBS, matching an 11-week low struck on Tuesday.

Against the yen, the euro stood at 161.78 yen hovering near a one-month low.

The dollar fell slightly to 121.62 yen down from around 121.70 yen in late U.S. trading on Tuesday.

The trader for a Japanese bank said the euro could fall towards 161.50 yen if the dollar were to break below 121.50 yen.

But any gains in the yen could be tempered by flows from Japanese investment trusts targeting overseas assets, traders said.

Reuters DKS VP0540