* Dollar rallies, boosted by rising U.S. Treasury yields
* Euro stung by Irish debt problems
* Dollar particularly strong vs yen on US-Japan yield spread
(Updates prices, adds quote)
By Naomi Tajitsu
LONDON, Nov 15 (Reuters) - The dollar index hit a six-week high on Monday, boosted by a rise in U.S. Treasury yields that heightened the appeal of U.S. assets, while the euro was stung as Ireland's debt problems shook confidence in the euro zone.
The 10-year Treasury yield hit a three-month high as the Wall Street Journal reported that a group of Republican-leaning economists is launching a campaign calling for the Federal Reserve to drop its plan to buy $600 billion of Treasuries.
Analysts said the rise in yields gave further reason to buy the dollar, which has recovered as investors reduce short dollar positions built up before the Fed's well-flagged decision earlier this month to begin another bout of quantitative easing.
Investors also sold the euro as Ireland struggled to convince investors it was in control of its debt problems, leaving open the possibility of a bailout. "There is evidence of stretched positioning - long positions in U.S. Treasuries and short positions in the U.S. dollar," said Elsa Lignos, currency strategist at RBC.
"Unlike QE1, which came more out of the blue, the market had a long time to process QE2 and to factor it in".
The dollar was particularly strong against the yen, rising to a near 6-week high above 83.00 yen, supported by a widening in yield spreads between U.S. and Japanese benchmark government bonds.
The dollar index was 0.5 percent higher on the day at 78.472, having hit a high of 78.562, its strongest since early October. Its gains came as the euro fell 0.5 percent to $1.3627.
The U.S. currency was boosted as the 10-year Treasury yield's climb to a three-month high around 2.86 percent suggested higher returns on U.S. assets.
Yields also rose after Richmond Federal Reserve President Jeffrey Lacker indicated opposition to the central bank's latest round of monetary easing.
"The market still wants to trade the correlation between yield spreads and the dollar, especially versus the yen," said Paul Mackel, director of currency strategy at HSBC.
Analysts say the Fed's decision to pump liquidity into the market through Treasury purchases will limit the upside for yields, but some say investors may trim long Treasury positions as a slight recovery in U.S. fundamentals suggests the Fed may not be as aggressive on QE.
EURO SUFFERS
Mackel at HSBC said higher yields would continue to boost the dollar. HSBC expects the euro to trade at $1.35 by year-end.
The single currency has taken a hit in the past week or so as Irish bond yields have rocketed on the country's struggles to control its spiralling debt.
Still, some investors have taken heart from reports that the European Union has an aid package of up to 90 billion euros prepared for Dublin, keeping the euro above Friday's six-week low of $1.3573.
The euro also had support at its 55-day moving average at $1.3551, while the dollar index must clear its 55-day average at 78.97 to extend its rally.
The possibility of a bailout lowered the cost of insuring against an Irish default on Monday, while the spread between Irish 10-year bond yields and their safer, German counterparts tightened a touch.
However, five-year Irish credit default swaps and the Irish/German yield spread remain near their widest ever, suggesting that investors have little faith in Ireland's ability to repay its debts without assistance.
Some analysts were unconvinced a possible rescue plan for Ireland would offer much support for the euro, given that other countries including Portugal are also battling debt problems.
(Additional reporting by Jessica Mortimer)