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FOREX-Dollar dips as stocks advance; hits 2-decade high vs yen

(Adds details, updates prices; changes byline, dateline; previous LONDON)

By Chuck Mikolajczak

NEW YORK, June 7 (Reuters) - The U.S. dollar index retreated from earlier highs and fell on Tuesday as U.S. equities shook off an early risk-off mood and turned positive, but the greenback managed to hit its highest level in 20 years against the Japanese yen.

Stocks on Wall Street advanced in the early portion of trading, reversing course after each of the major indexes on Wall Street opened with sharp losses and the Nasdaq lost more than 1%, dampening the appetite for the safe haven dollar.

The dollar index fell 0.117% at 102.340, with the euro up 0.07% to $1.0702.

The yen weakened to touch 132.99 per dollar, its lowest since April 3, 2002. The greenback has been strengthening against the yen as the policy paths of their countries' respective central banks diverge.

"The reason why the dollar is doing so well is the Fed kicking and screaming and saying they are going to raise rates 50 basis points and 50 basis points and 50 basis points and all that," said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta, Georgia.

"Then particularly with the yen, Japan is saying no, inflation not going to be a problem, we are not getting it, so we are not raising rates, so we are not backing off our quantitative easing."

Bank of Japan Governor Haruhiko Kuroda on Tuesday repeated his view that a weak yen benefited the economy if its moves were not too sharp, a comment that followed the currency's fall to a fresh two-decade low.

The Japanese yen weakened 0.44% versus the greenback at 132.45 per dollar, while Sterling was last trading at $1.2575, up 0.36% on the day.

After touching a near 20-year high of 105.01 on May 13, the dollar index has eased back to around the 102 level, although Friday's strong payrolls report helped the dollar notch its first weekly gain in three.

The pound gained against the dollar, rebounding after falling to a three-week low against the greenback on the heels of British Prime Minister Boris Johnson escaping a confidence vote that left him politically wounded.

The Australian dollar rose 0.35% versus the greenback to $0.722 after the Reserve Bank of Australia lifted its cash rate by 50 basis points to 0.85%, the most in 22 years, and flagged more tightening to come as it battles to restrain surging inflation.

Investors will hear from the European Central Bank on Thursday at its next policy announcement, with the U.S. Federal Reserve set to announce policy next week.

In cryptocurrencies, Bitcoin last fell 5.06% to $29,850.00.

(Reporting by Chuck Mikolajczak Editing by Bernadette Baum)

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