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FOREX-Dollar rebounds as U.S. yield spike stalls

* U.S. bond market stabilizes after 10-year yield hit 4-year peak

* U.S. services sector strongest in over 12 years - ISM

* ECB's Draghi sees risks from currency market volatility

(Updates market action, changes dateline, previous LONDON) NEW YORK, Feb 5 (Reuters) - The dollar rose against a basket of currencies on Monday as the U.S. bond market selloff levelled off after the 10-year yield hit a four-year peak on worries that the Federal Reserve might raise interest rates faster to counter signs of wage pressure. Analysts cautioned, however, that further gains in the greenback would be limited as other economies seem poised to expand quicker than the United States. Speculation that other central banks besides the Federal Reserve may roll back stimulus will probably cap the U.S. currency's recovery. "The dollar selling (had been) overdone," said Paul Christopher, head global market strategist at Wells Fargo Investment Institute in St. Louis. "We think rates are not going to go up a lot more here." Early on Monday, the benchmark 10-year Treasury yield reached 2.885 percent, its highest since January 2014, after a robust jobs report showed wage growth last month posted its biggest annual gain since June 2009. The yield was last at 2.843 percent, down 1 basis point from late on Friday. The Institute for Supply Management's gauge on U.S. services industries, which hit a 12-1/2 year high last month, also supported the dollar on Monday. At 12:52 p.m. (1752 GMT), the dollar was up 0.3 percent against a basket of six major currencies at 89.469 after gaining 0.6 percent on Friday. "Could (Monday's performance) change the trend?" Christopher said. "I doubt it." Data on currency futures positions showed net bearish bets against the dollar swelled to $17.5 billion last week, just shy of a five-year high. The euro fell 0.4 percent to $1.2410, slightly below a three-year high of $1.2538 on the EBS trading system . The euro briefly pared losses following upbeat comments by European Central Bank President Mario Draghi before the European Parliament. But Draghi said the current surge of the single currency might impair its outlook for price stability.

Against the yen, the dollar weakened in step with losses on Wall Street, where rising bond yields have sparked selling in stocks on concerns about rising borrowing costs on corporate profits and consumer spending. The greenback slipped 0.05 percent to 110.03 yen, holding above a four-month low set on Jan. 26.

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Currency bid prices at 12:32PM (1732 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change

Session

Euro/Dollar EUR= $1.2418 $1.2460 -0.34% +3.52% +1.2475 +1.2400 Dollar/Yen JPY= 110.0100 110.1000 -0.08% -2.36% +110.2900 +109.6600 Euro/Yen EURJPY= 136.62 137.23 -0.44% +1.07% +137.2200 +136.3300 Dollar/Swiss CHF= 0.9366 0.9310 +0.60% -3.87% +0.9376 +0.9288 Sterling/Dollar GBP= 1.4020 1.4120 -0.71% +3.76% +1.4150 +1.3988 Dollar/Canadian CAD= 1.2487 1.2424 +0.51% -0.72% +1.2499 +1.2398 Australian/Doll AUD= 0.7918 0.7920 -0.03% +1.50% +0.7953 +0.7891

ar

Euro/Swiss EURCHF= 1.1631 1.1600 +0.27% -0.50% +1.1639 +1.1573 Euro/Sterling EURGBP= 0.8854 0.8820 +0.39% -0.33% +0.8871 +0.8812 NZ Dollar/Dolar NZD= 0.7288 0.7301 -0.18% +2.85% +0.7330 +0.7279 Dollar/Norway NOK= 7.7797 7.7311 +0.63% -5.21% +7.8006 +7.7007 Euro/Norway EURNOK= 9.6637 9.6324 +0.32% -1.88% +9.6781 +9.6023 Dollar/Sweden SEK= 7.9275 7.9035 -0.01% -3.34% +7.9412 +7.8825 Euro/Sweden EURSEK= 9.8449 9.8456 -0.01% +0.06% +9.8540 +9.8263

(Additional reporting by Tommy Wilkes in London; Editing by Larry King and Lisa Von Ahn)