FOREX-Dollar underpinned by higher U.S. yields

* Dollar underpinned by U.S. data, steeper yield curve

* Dollar at 91.74 yen , near 2-month high of 91.89 yen

* Sterling pressured; eyes on BoE minutes

(Recasts, adds quotes, changes dateline previous SYDNEY)

By Tamawa Desai

LONDON, Dec 23 (Reuters) - The dollar remained broadly supported on Wednesday after touching two-month peaks against the yen in holiday-thinned trade, underpinned by firm U.S. housing data and higher U.S. bond yields.

Growing optimism on the U.S. economy has pushed the Treasury yield curve to record steep levels and long-dated yields to four-month highs.

That has especially helped the dollar against the yen, where there has traditionally been a strong correlation with the spread between U.S. and Japanese government bond yields.

The spread between the yields on the U.S. two-year note and Japan's two-year bond has widened to about 75 basis points from 48 bps at the start of the month.

At 0839 GMT, the dollar stood at 91.74 yen , down 0.1 percent from late New York trade but holding near the day's peak of 91.86 yen which was the highest since late October, according to Reuters data.

Trading was extremely thin as Tokyo markets were closed for a national holiday and as many market players elsewhere had already wound down for the Christmas holidays.

Traders said the dollar's upside was hindered by Japanese exporter offers near 92.00/30 yen.

The euro was flat at $1.4250 after falling to a 3-1/2 month low of $1.4216 on Tuesday after a third credit downgrade of Greece [ID:nLDE5BL0NG].

Traders were eyeing the 200-day moving average at $1.4194, a break of which could see it retreat to the $1.4000/1.4044 area. Resistance was seen near $1.4300.

Sterling remained under $1.60 after slipping below that level for the first time in two months on Tuesday on a disappointing revision to UK third quarter growth figures.

Traders awaited the minutes of the Bank of England's latest policy setting meeting due out at 0930 GMT, at which analysts expect the BoE to have voted unanimously to keep rates steady at 0.5 percent and its quantitative easing target unchanged at 200 billion pounds.

Policymakers have indicated they would not shift policy until at least February when they will get their new growth and inflation forecasts and the scheduled asset purchases run out.

Some market players wonder if the spate of recent weak data may have brought the possibility of further easing forward, though most do not expect such a dovish leaning.

"We suspect they could be disappointed, with the December minutes likely to be largely a carbon copy of November's in terms of the arguments surrounding the outlook for growth and inflation," said Daragh Maher, deputy head of FX strategy at Calyon.

The pound was down 0.1 percent on the day at $1.5953 . It had fallen as low as $1.5923 on Tuesday, its weakest since mid-October.

The New Zealand dollar slid to a three-month low of $0.6974 after data showed the economy grew a meagre 0.2 percent in the third quarter, disappointing market hopes for something stronger [ID:nSGE5BL00R].

Traders expect U.S. personal spending and new home sales data due out later in the day to underscore optimism about the U.S. economy after data on Tuesday showed a sharp 7.4 percent increase in November existing homes sales. (Editing by Stephen Nisbet)