* Dollar clings to previous day's gains vs euro
* Euro's rally loses steam after hitting 5-mth high last week
* U.S. equities hurt by spike in U.S. yields
By Masayuki Kitano
TOKYO, May 28 (Reuters) - The dollar held steady against the euro on Thursday, having pulled up from five-month lows hit against the single European currency last week due to short-covering.
The euro fell around 1 percent against the dollar on Wednesday and pulled away from last week's high near $1.4050, which was the euro's highest since early January.
On Wednesday, currencies of high interest-rate countries such as Australia and New Zealand, also halted recent rallies and fell more than 1 percent.
The dollar's broad rise on Wednesday may have been partly caused by a fall in U.S. equities, which were dragged lower on concerns that rising yields on U.S. Treasuries could hamper the economy, market players said.
"People's views are mixed, there is both optimism and pessimism," said a trader for a Japanese trust bank.
Although investors tend to move funds out of the dollar when they become optimistic about the outlook for the U.S. and global economy, they probably still lack conviction, he said.
Falls in equities can curb investor risk appetite and spur safe haven buying of the dollar.
The euro rose 0.1 percent from late U.S. trading on Wednesday to $1.3838, having pulled back from a five-month high of $1.4051 hit on trading platform EBS last week.
The dollar rose 0.4 percent against the yen to 95.69 yen.
Besides rising hopes that the worst of the U.S. and global recession may be over, the dollar has also come under pressure recently due to worries about rising U.S. debt issuance.
The dollar hit a five-month low against a basket of major currencies last week, after a warning from Standard & Poor's that Britain's triple-A credit rating could be cut stoked worries the debt of the world's reserve currency may face the same fate.
Moody's Investors Service, however, affirmed its top credit rating for the United States on Wednesday, ruling out any changes in the foreseeable future.
It warned that the United States' Aaa credit rating could eventually come under pressure if it failed to reduce current debt levels once economic growth returns.
The Australian and New Zealand dollars regained some ground in the wake of their falls on Wednesday.
The Australian dollar rose 0.5 percent to $0.7802, but had pulled back from Wednesday's high of $0.7893, which was the highest in almost eight months. The New Zealand dollar rose 0.3 percent to $0.6170. It hit a 7-month high of $0.6262 on Tuesday.