* Dollar slides broadly as investors reassess U.S. rate view
* Euro recovers vs dollar, boosted by sterling gains
* Rising stocks support higher yielders, sting yen
By Naomi Tajitsu
LONDON, June 9 (Reuters) - The dollar slipped on Tuesday, pausing from gains versus the euro as investors reassessed whether speculation of a possible rise in U.S. interest rates later this year may push the U.S. currency higher.
A climb in European shares in early trade helped to raise demand for risky trades, helping to boost the Australian and New Zealand dollars, while stinging the yen across the board.
Also adding downward pressure on the dollar was a jump in sterling, whose rally on stronger-than-expected UK housing figures and signs of some political stability in the country helped to lift the euro from earlier losses against the dollar.
The dollar had climbed after optimistic U.S. jobs data late last week stoked the view that U.S. rates may rise from roughly zero at the end of 2009, but its rally had fizzled by Tuesday as a lack of major economic data or events left traders with few reasons to push the dollar higher, analysts said. "The market has not moved significantly towards dollar-positive sentiment, and it's fair to expect that investors are unwilling to take on strong positions (in favour of the U.S. currency," said Michael Klawitter, senior currency strategist at Dresdner Kleinwort in Frankfurt.
Traders said they were focusing on economic indicators and upcoming auctions for U.S. debt this week to gauge whether a shift towards a dollar-positive trend will take hold.
By 0802 GMT, the euro traded 0.3 percent higher at $1.3940, near the day's high of $1.3963 hit according to Reuters data.
This helped to push the dollar 0.3 percent lower against a basket of currencies to 80.596, retreating from 81.466 hit on Monday for the first time since May 20.
Sterling climbed to the day's high of $1.6177, recovering from a slide to $1.5803 the previous day, after data showing that the pace of falls in UK house prices suggested the ailing housing market may be nearing a trough.
Traders in London said the pound was also boosted on relief that political troubles facing UK Prime Minister Gordon Brown appear to have calmed for now, after members of his party offered their support to his leadership on Monday.
The Australian and New Zealand dollars each rose roughly half a percent against the U.S. currency, after European shares climbed 0.7 percent in early trade and stoked some appetite for higher-yielding currencies.
Despite its broad losses, the dollar rose 0.4 percent against the yen to 98.05 yen as higher share prices stung the yen, which had gained earlier in the year due to risk aversion.
U.S. RATE VIEW
Data last week showed the pace of U.S. job losses slowed sharply in May, sparking talk that the Federal Reserve may raise rates later this year and boosting the dollar.
On Friday, U.S. short-term interest rate futures, which track market expectations for Fed rate policy, had their first meaningful move in months -- bringing forward the possible timing of a Fed rate hike to late 2009 from early 2010.
U.S. two-year Treasury note yields stood at 1.338 percent on Tuesday, after rising above 1.4 percent on Monday for the first time in seven months. The yield has jumped from around 0.960 percent a week ago due to increasing rate rise expectations.
Some analysts were unconvinced that speculation of higher rates will heat up even more, arguing that a rise in inflation risks is unlikely this year as the global economy continues to struggle. Given this scenario, some said it may be premature to reward currencies on rate rise expectations.
"It feels too early for FX markets to become energised about prospective central bank action, at least in the near term," analysts at Calyon wrote in a research note.
"This in turn means there is little real logic behind the idea that shifts in the interest rate futures market will overwhelm the long-running consideration of risk aversion versus risk appetite in determining the USD's fortunes. At least, not yet."
Market participants said they were awaiting an auction of three-year U.S. Treasury notes later in the day and auctions of 10-year and 30-year U.S. Treasuries later in the week to glean a better picture of rate expectations. (Editing by Stephen Nisbet)