* Dollar steady, market digests Fed official's rate comments
* Fed's Bullard: past pattern may mean low rates until 2012
By Charlotte Cooper
TOKYO, Nov 19 (Reuters) - The dollar hovered near the year's lows against a basket of currencies on Thursday after slipping the previous day as economic indicators and a Fed official reinforced the view that U.S. rate hikes are still distant.
St. Louis Federal Reserve Bank President James Bullard said the Fed may start tightening financial conditions by selling assets it has accumulated rather than raising interest rates.
Bullard also noted that if the Fed followed its past pattern, it would not raise its target for overnight interest rates until early 2012, but also added there were reasons to think it may not wait that long this time.
Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney, said the market was still digesting the rate outlook implications of Bullard's comments, noting that U.S. shares had closed in the red, struggling to take heart from the low rate prospects.
All in all, currencies that have benefited against the dollar on the low-rate view, including the Australian dollar and the euro, have faced headwinds this week. "We're running into a bit of buyer fatigue. We've come a long way very fast and there's a huge overhang of longs in the commodity space and the risk space," Trinh said.
"So maybe positioning is somewhat saturated at the moment and that upward momentum is flagging somewhat."
The dollar index, a measure of its performance against a basket of six currencies, was flat on the day at 75.097, after dipping to a 15-month low of 74.679 on Tuesday and then rebounding sharply in the next session.
The euro was steady at $1.4952, after climbing more than half a percent on Wednesday. But it is struggling to break back above $1.5000 and forge new highs for the year above $1.5064.
The market will watch U.S. jobless benefit claims for the week ended Nov. 14, due at 1330 GMT, to see if the labour market is stabilising. Economists in a Reuters survey forecast a total of 505,000 new filings compared with 502,000 the week before.
The dollar was also unchanged against the yen at 89.36 yen after dipping to its lowest in a month this week at 88.73 yen. It remains firmly in a downtrend against the Japanese currency stemming back to April this year and dealers do not rule out a test of its October low of 88.01.
The euro was steady at 133.57 yen and the Japanese currency was firmer against higher-yielders the Australian and New Zealand dollars, which have both failed to break to new 2009 highs since hitting the year's peaks in October.
The Australian dollar slipped slightly to $0.9270 from $0.9292 in late U.S. trade, and well below a 15-month peak at $0.9407 set on Monday. Expectations for a December rate hike have cooled recently, sapping some of the currency's strength.
Sterling remained on the backfoot at $1.6732 and 89.36 pence per euro after dropping sharply against the euro on Wednesday when central bank minutes indicated policymakers would keep the UK's ultra-loose monetary policy for the foreseaable future. (Editing by Edwina Gibbs)