FOREX-Dollar finds footing as looming data pose test for policymakers

* U.S. dollar index up 0.2% in holiday-thinned Asia session
* Payrolls, Fed speakers eyed for clues on rates moves
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, May 4 (Reuters) - The dollar drifted higher in
the Asia session on Tuesday, pausing a monthlong decline as
investors weigh whether a roaring U.S. economic recovery may
force interest rates higher and are looking to upcoming economic
data and policy speeches for clues.
The greenback rose about 0.2% against the yen, euro and
pound in trade thinned by holidays in China and Japan. It
stepped up slightly further against the trade-sensitive
Australian and New Zealand counterparts while the dollar index
=USD against a basket of major rivals added 0.2% to 91.151.
The advances partly reverse Monday's losses and leave the
index about 0.8% above a one-month low struck last week. Traders
said its next moves hinge on U.S. labour data due Friday and
clues in the interim about the thinking of Federal Reserve
policymakers.
The euro EUR=EBS last sat at $1.2036 while a dollar bought
109.29 yen JPY=EBS . The Aussie dollar AUD=D3 was 0.3% softer
at $0.7740 and the kiwi NZD=D3 down 0.4% to $0.7171. AUD/
"Markets will not be comfortable pushing the dollar all the
way down given this in-your-face U.S. outperformance, and how
much longer this may last given outbreaks happening elsewhere,"
said Mizuho economist Vishnu Varathan in Singapore.
"If incoming data, whether its services ISM or payrolls
shows job creation continues to be strong...I think markets will
start gravitating towards the idea that the Fed could move
sooner (than projected)," he said, referring to rate rises.
Benchmark ten-year U.S. Treasury yields US10YT=RR had
dropped on Monday following softer-than-expected U.S.
manufacturing data and reassurance from New York Fed President
John Williams that the recovery so far is "not nearly enough" to
prompt monetary policy tightening. But the detail in the Institute of Supply Management's
survey showed transport snarls and raw material shortages caused
the dip in output, rather than any faltering demand and there
are hints of division at the Fed over the best course of action.
Dallas Fed President Robert Kaplan caused a stir on Friday
by calling for beginning the conversation about tapering. He is
due to appear again at a Q&A session at 1700 GMT on Tuesday and
a slew of Fed speakers are scheduled to talk in coming days.
"Non-voting hawks like Kaplan and (Loretta) Mester could
repeat Kaplan's call for a conversation about tapering," Westpac
analysts said in a note.
"The Fed's dovish influential core won't have any of it, but
expectations for solid U.S. data this week and likely more
hawkish regional Fedspeak leave the dollar index positioned for
more two-way price action."
Elsewhere central bank meetings are coming in to focus. The
Aussie dollar was unmoved by an expected decision from the
Reserve Bank of Australia on Tuesday to leave policy settings
unchanged. The bank did, however, upgrade some headline economic
forecasts and more detailed projections are due on Friday.
Sterling dipped marginally to $1.3870 with a Bank of England
meeting on Thursday the main event in traders' diaries. Analysts
reckon the bank might announce a slowdown in its bond buying
programme as vaccinations have bolstered Britain's economy.
"The rapidly improving economic outlook in the UK amid
general dollar weakness may just be the catalyst to move
sterling back above 1.40 in the coming weeks," said Commonwealth
Bank of Australia analyst Kim Mundy.
Elsewhere cryptocurrency ether ETH=BTSP powered to another
record peak, this time nearing $3,500 as speculators drive
white-hot crypto markets higher. It last sat at
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