* US Treasury auctions this week in focus
* Activity to pick up as US, UK markets resume trading
By Rika Otsuka
TOKYO, May 26 (Reuters) - The dollar held near a five-month low against a basket of currencies on Tuesday as traders awaited U.S. Treasury auctions this week to test the strength of investor appetite for dollar assets.
The U.S. Treasury will sell two-year notes today, followed by a five-year auction on Wednesday and a sale of seven-year notes on Thursday. The auction series will total $101 billion.
The dollar slid across the board last week when concern that U.S. government debt may lose its AAA rating prompted investors to sell the world's reserve currency.
Activity was light in early trade in Asia but is expected to pick up as investors in the UK and the United States return after public holidays on Monday.
"Dollar selling is likely to gather pace if the Treasury auctions meet only lukewarm demand, causing long-term Treasury yields to climb," said Yoshihisa Kanzaki, a trader at Shinkin Central Bank.
"Investors will focus on the fact that higher interest rates would hamper a recovery in the U.S. housing market and the broader economy," Kanzaki said.
The dollar index, a gauge of the greenback's performance against six major currencies, was steady at 80.035, and remained near a five-month trough of 79.805 hit on Friday.
The euro was steady from late Asian trade on Monday at $1.4016, but remains in sight of Friday's high on trading platform EBS of $1.4051, its highest since early January.
The European single currency dipped earlier in the day after the Germany-based Ifo think tank's business climate index on Monday fell short of market expectations, suggesting that any recovery in the euro zone's biggest economy will take more time.
But the euro recovered as the market's attention shifted back to the U.S. debt auctions.
The dollar traded 94.88 yen, down from 95.10 yen in late Asian trade on Monday, edging towards a two-month low of 93.85 yen on trading platform EBS hit on Friday.
The yen fell broadly the previous day after news that North Korea conducted a nuclear test, followed by a report that it had fired short-range missiles, were seen as a negative factors for the currency, given Japan's geographical proximity to Pyongyang.
North Korea is ready to fire another short-range missile off its west coast either on Tuesday or Wednesday, Yonhap news agency said on Tuesday. (Editing by Joseph Radford)