* Dollar extends short-covering bounce
* Short-term US yields near zero amid flight to safety
SYDNEY, Nov 23 (Reuters) - The U.S. dollar inched higher on Monday, extending a short-covering bounce as investors pared risk trades in a holiday-thinned week.
The general theme remained profit-taking and a shift to safe-havens, notably the short end of the U.S. Treasury market where yields had dropped to near zero, and briefly went negative last week. That flow to U.S. assets was helping underpin the U.S. dollar and should linger through to the new year.
"It worries me that two-year yields are trading as they are plus bill rates went negative and gold is bid, bid, bid," said Robert Rennie, chief currency strategist at Westpac.
"Makes me think there is a huge flight to quality going on that hasn't hit FX yet...perhaps a bit of a warning sign."
The trend continued on Monday, albeit slowly with Tokyo on holiday. The euro edged down to $1.4845, from Friday's $1.4860. Support was seen around Friday's $1.4800 low and the 55-day moving average at $1.4784, while resistance came in at $1.4935.
Against a basket of currencies the dollar was 0.05 percent higher at 75.707, having reached as high as 75.879 on Friday. That marked a technically significant bounce from a low of 74.679 early in the week and left a potentially bullish outside trading week on the charts.
The dollar was little changed at 88.88 yen, from 88.97 in New York, but remains in a gradual downtrend that stretches back four weeks now. Support seen under 88.70, with resistance at 89.10 yen.
Sterling eased to $1.6480, from $1.6502 on Friday, while the Australian dollar fell to $0.9118, from $0.9153. Trade was likely to be thin all week given U.S. markets will be shut on Thursday for Thanksgiving, and the lack of liquidity could lead to volatile moves.
The U.S. diary included existing home sales on Monday, revised GDP figures on Tuesday and the minutes of the Federal Reserve's last policy meeting the day after.
Analysts at Barclays believe the minutes should show the Fed's reference to resource utilization and inflation in its policy statement was intended to underline its commitment to keeping rates low.
"This language was not meant to signal that the extended period phrase would soon be removed," they said in a note to clients. "We expect the FOMC's updated economic projections to continue to show moderate economic growth and modest inflation."
The greenback was also supported as banks parked funds in short-term, liquid safe-haven assets such as U.S. government bonds ahead of book closings at the end of this month and next. Rates on two-year Treasury notes have been falling steadily and briefly broke beneath the year's low of 0.68 percent on Friday. Three-month bill rates dived last week to reach a wafer-thin 0.015 percent, suggesting investors were seeking safety at any cost over year-end.
Treasury sells a huge $118 billion in two-, five- and seven-year notes this week and traders expect strong demand for the more liquid shorter-dated paper. (Reporting by Wayne Cole; Editing by Jonathan Standing) ((wayne.cole@reuters.com ; +61 2 9373 1813; Reuters Messaging: wayne.cole.reuters.com@reuters.net)) (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)