By Kevin Buckland and Hideyuki Sano

TOKYO (Reuters) – The dollar hovered near multi-week lows versus major peers on Tuesday, weighed by subdued Treasury yields ahead of the Federal Reserve’s policy decision this week, while the yen hardly budged after the Bank of Japan kept its policy on hold.

The safe-haven greenback was also out of favour after world stocks started the week hitting a record high, amid increasing investor confidence in a rapid global recovery from the pandemic.

“The dollar doesn’t seem to have the strength it had earlier this year,” said Kyosuke Suzuki, chief of financial algotech company at Ryobi Systems. “It had been driven by various expectations, such as massive fiscal spending and speedy vaccinations in the States. Most of those appear to have been priced in.”

The dollar index, which tracks the U.S. currency against six peers, was little changed at 90.947 in mid-Asian session, after dipping to the lowest since March 3 overnight at 90.679.

The dollar added 0.1% to 108.18 yen, another haven currency, continuing its rise from the seven-week low of 107.48 reached Friday.

The yen showed a muted response after the Bank of Japan kept its monetary policy on hold as widely expected.

Additionally, no change to policy is expected when the Federal Open Market Committee ends its two-day meeting on Wednesday.

However, the market will pay close attention to comments from Fed Chairman Jerome Powell, who is likely to face questions over whether improving conditions warrant a withdrawal of monetary easing.

Most analysts though expect him to say such talk is premature, which could put downward pressure on Treasury yields and the dollar.

“The reflation trade is back on,” Gavin Friend, a strategist at National Australia Bank, said on a client podcast.

“Currencies outside of the dollar should be doing quite well anyway in that environment.”

The dollar has fallen nearly 3% since late March as U.S. Treasury yields traded in narrow ranges after retreating from a 14-month high of 1.7760%, slashing the currency’s yield appeal.

The benchmark 10-year Treasury yield was around 1.58% on Tuesday, tracking sideways since sliding to a one-month low of 1.528% in the middle of this month.

The euro slipped 0.1% to $1.2071, but remained close to the two-month high of $1.2117 reached Monday.

The commodity-linked Australian dollar, a barometer of risk appetite, eased 0.15% to $0.7789, after a 0.7% rally overnight that took it just shy of a five-week peak.

The offshore Chinese yuan retreated 0.1% after rising to a seven-week top of 6.4710 per dollar on Monday.

In cryptocurrencies, bitcoin traded around $53,500 following a 10% surge on Monday, driven by reports that JPMorgan Chase is planning to offer a managed bitcoin fund.

That snapped a five-day losing streak that took the digital token to the cusp of $47,000, with losses accelerating amid worries about U.S. President Joe Biden’s plan to raise capital gains taxes.

(Reporting by Kevin Buckland and Hideyuki Sano; Editing by Sam Holmes)