* U.S. weekly jobless claims drop
* U.S. Producer prices unexpectedly rise
* Kiwi dollar leads gains vs greenback
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh (Updates with U.S. market open; changes dateline; previous LONDON)
NEW YORK, July 13 (Reuters) - The dollar steadied against a basket of major currencies on Thursday, helped by upbeat U.S. economic data, a day after Federal Reserve Chair Janet Yellen signaled the Fed's rate hikes could be gradual.
The dollar index, which tracks the greenback against six major rivals, was little changed on the day at 95.768 after earlier falling to 95.464, its lowest since October 2016.
The U.S. economy is healthy enough for the Fed to raise rates and start winding down its massive bond portfolio, but low inflation may leave the central bank with diminished leeway, Yellen said at her semiannual appearance before Congress on Wednesday.
The number of Americans filing for unemployment benefits fell last week for the first time in a month and producer prices unexpectedly rose in June, likely keeping the Fed on track for a third rate increase this year.
"We are seeing the dollar do a little bit better this morning particularly following the producer price index figure but overall dollar trading has been somewhat subdued," said Sireen Harajli, FX strategist at Mizuho in New York.
"Yesterday, Yellen's comments were perceived as more dovish by the market and the lack of confidence in U.S. policymaking is also not helping," she said.
Yellen returned to Capitol Hill on Thursday to testify before the Senate Banking Committee. Investors were also focused on U.S. consumer price index data due on Friday.
The dollar was 0.2 percent stronger against the yen and little changed against the euro.
"There is some speculation that the ECB is going to start hinting at reducing its stimulus and possibly ending its quantitative easing programme," Harajli said, citing news that European Central Bank President Mario Draghi may address the Jackson Hole central banking conference next month.
"I think that's been supportive for the euro."
Yellen's testimony boosted the appeal of the higher yielding currencies. The New Zealand dollar was up 0.8 percent on Thursday against the greenback and the Australian dollar gained 0.61 percent.
The Canadian dollar edged lower against its U.S. counterpart, but held on to most of its sharp gains from the day before as domestic bond yields rose in anticipation of additional rate increases from the Bank of Canada.
Sterling rose for a send straight day against the greenback and was up 0.38 percent to $1.2931.
(Reporting by Saqib Iqbal Ahmed; Editing by Meredith Mazzilli)