* Dollar dips with Wall St set to open higher
* RBA holds rates, sparking buying in Aussie, euro
* BoC, ECB, BoE in focus as OECD sees more big rate cuts
(Adds quotes, updates prices)
By Kirsten Donovan
LONDON, March 3 (Reuters) - The dollar slipped on Tuesday with Wall Street set to recover some of the previous day's hefty losses and as traders bought the euro and other higher-yielding currencies after the Reserve Bank of Australia unexpectedly left interest rates on hold.
But activity was subdued as investors took a wait-and-see stance, believing that increased worries about the financial system and fears about the deepening global recession would quickly curtail any move into riskier assets.
Illustrating how fragile markets are, European equities pared earlier gains with the FTSEurofirst 300 hitting a lifetime low, although U.S. stock futures were still pointing to a higher open on Wall Street.
The dollar index, a gauge of its strength against a basket of six other major currencies, hit a three-year high in overnight trade as investors sought shelter in the world's most liquid currency.
But it pared gains as the RBA kept rates unchanged at 3.25 percent on Tuesday, confounding hopes for a cut, saying stimulus already in the pipeline was helping the country avoid the depths of recession seen elsewhere.
"Yesterday we saw some big moves in risky assets in general and today we've seen a bit of stabilisation of sorts but I don't think it's a reversal of any sort," said Adarsh Sinha, a currency strategist at Barclays Capital.
"The dollar has been rallying, the dollar index made a new high and we're seeing a bit of consolidation around these levels."
By 1015 GMT, the dollar index was 0.45 percent lower at 88.893, after hitting a three-year high of 89.026 in Asian trading. The Australian dollar jumped 2 percent to $0.6420.
The euro received a boost as speculators bought back the European single currency following a jump in the Australian dollar, and ahead of a policy meeting by the European Central Bank later this week.
But both the euro and sterling pared gains against the dollar after the OECD said it expected further significant rate cuts from major central banks including the ECB and Bank of England.
Organisation for Economic Co-operation and Development chief economist Klaus Schmidt-Hebbel also said the global economic downturn will be considerably deeper than even the International Monetary Fund forecast a month ago.
The euro rose 0.35 percent from late U.S. trade to $1.2627, recovering losses suffered in the wake of European Union leaders' rejection of a mass bailout for Eastern Europe, which weighed on the single currency the previous day.
LULL IN THE STORM?
The dollar was supported on Monday as steep losses on Wall Street and dire financial news including insurer AIG's record loss increased worries about the global credit crisis.
"What we have for now could well end up being a temporary lull before the pace picks up again," said James Hughes, market analyst at CMC markets in a note.
"But one point that yesterday's broad based sell-off in benefit of the dollar does make is that the currency continues to hang onto its favoured status despite the rather dubious outlook that's associated with the U.S. economy right now."
Markets will also remain focused on monetary policy decisions with the Bank of Canada expected to cut its key interest rate by half a point to a record low of 0.5 percent later on Tuesday ahead of policy meetings by the European Central Bank and the Bank of England on Thursday.
The ECB is expected to cut interest rates to an all-time low of 1.5 percent from the current 2 percent, with the BoE also seen cutting by 50 basis points to a record low 0.5 percent and possible detail the roll-out of alternative monetary policy strategies.
"The belief that quantitative easing will coincide with a rate cut is doing the rounds again weighing heavily on sterling," said Maurice Pomery, head of FX at IDEA Global.
"The rate cut is probably of little importance now and the market will have to decide what impact on the pound will be seen if they do embark on quantitative easing this week."
Sterling was up 0.26 percent at $1.4080.
The dollar was 0.38 percent higher at 97.58 yen, staying below a 3-1/2 month peak of 98.72 yen struck last week. (Reporting by Kirsten Donovan, editing by Mike Peacock/Victoria Main)