FOREX-Dollar steady, supported by rise in U.S. bond yields
* Dollar supported after Friday's rise in U.S. bond yields
* U.S. 10-year yield hits 2-year high on Friday
* Dollar index edges away from 7-week low hit on Aug. 8
* Fed minutes a focal point for this week
SINGAPORE, Aug 19 (Reuters) - The dollar held firm versus a basket of currencies on Monday and stayed above a recent seven-week low, getting support after U.S. 10-year Treasury yields set a two-year high on Friday.
The dollar index, which measures the greenback's value against a basket of major currencies, inched up 0.1 percent to 81.333, staying above its Aug. 8 low of 80.868, the lowest for the dollar index since June 19.
The greenback had gained support on Friday as the U.S. 10-year Treasury yield set a two-year high of 2.866 percent on the back of expectations that the Federal Reserve could start paring back its bond purchases in September.
Such expectations have been bolstered in recent sessions by some encouraging U.S. data, including a drop in weekly jobless claims to a near six-year low.
A focal point for markets this week is the minutes of the Federal Reserve's July 30-31 policy meeting, due to be released on Wednesday.
"July's FOMC meeting minutes will be closely read to see whether officials were concerned about the summer rise in U.S. market interest rates holding back the recovery," Mansoor Mohi-uddin, head of foreign exchange strategy for UBS, said in a weekend research note.
"If the minutes still point to the FOMC committee continuing to consider slowing down bond buying, the dollar will benefit," he added.
The dollar edged higher versus the yen, rising 0.2 percent to 97.76 yen. The yen has been inversely correlated to moves in Japanese share prices, and moves in equities are likely to remain a focal point for the Japanese currency.
Traders said the yen showed limited reaction to data showing that Japan posted a wider than expected trade deficit in July of 1.02 trillion yen ($10.5 billion).
While the dollar has been supported by rising U.S. yields, the impact has been offset in recent weeks by improving euro zone and UK economic indicators, which have given a lift to the euro and sterling and kept a lid on the greenback.
The euro held steady near $1.3328, having backed off Friday's intraday peak of $1.3380. Still, the single currency was not too far from a seven-week high of $1.3401 set on Aug. 8.
While the euro has been supported by a recent run of solid European economic data, such a situation probably won't last for too long, said Daisuke Karakama, market economist for Mizuho Bank in Tokyo.
"I think the April-June GDP will be the peak for the euro zone this year," Karakama said.
"Since Europe will probably worsen from here, I think there will be a phase when the dollar starts to attract demand against the euro," he added.
In a sign of an improvement in investor sentiment toward Europe, a Bank of America Merrill Lynch Global Research report showed on Friday that investors worldwide poured $2.3 billion into European stock funds in the latest week, the most in more than two years.
The inflows came during the weekly period ended Aug. 14, when data showed that the economies of Germany and France grew more quickly than expected in the second quarter, pulling the euro zone out of a 1-1/2-year recession.