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FOREX-Dollar recoups lost ground, aided by higher Treasury yields

(Updates prices, adds comment)

* Dollar off recent lows, selling pressure abates

* Rising U.S. Treasury yields draw in dollar-buying interest

* Speculators continue to trim long dollar bets

By Daniel Bases

NEW YORK, May 18 (Reuters) - The U.S. dollar made broad-based gains on Monday, recovering ground after several weeks of selling that had brought the greenback down to more attractive levels after prolonged strength.

The euro, which rose nearly 9 percent in value against the U.S. dollar in the course of a month, pulled back more than 1 percent, its worst daily performance since mid-March.

"With the euro above $1.14, that was much more attractive for sellers and might be one explanation for the downside pressure it is feeling today," said Vassili Serebriakov, currency strategist at BNP Paribas (Xetra: 887771 - news) in New York.

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"Our view is that the dollar is still going to do well, but probably it is a little premature to jump back into long-dollar positions because we don't see an immediate catalyst. Ultimately it will have to be the data to get people back in and we might have to wait for May's payrolls for that," he said.

The euro fell 1.30 percent to $1.12995 on the EBS trading platform.

One trader pointed toward low liquidity in the market and benchmark 10-year U.S. Treasury note yields bouncing up to 2.23 percent for giving the greenback a bid.

"The market is difficult to trade. Liquidity is becoming more and more of a challenge," said the trader.

Strategists said country-specific factors allied to rising U.S. bond yields had helped deepen a correction that started late in the European afternoon on Friday.

"There are a lot of people out there who think the Fed will not now hike this year. I still think the U.S. data will turn around and we'll get a (rate) move," said Adam Myers, Head (Other OTC: HEDYY - news) of European FX strategy at Credit Agricole in London.

Data from the Commodity Futures Trading Commission released on Friday showed speculators further pared back their bullish dollar bets in the week ended May 12, pushing net long positions down for the seventh straight week to their lowest in nine months.

News of a capital gains tax on New Zealand property investments has added to rate-cut speculation there and made the kiwi the biggest loser among major pairs in recent days. The government on Sunday said that income gained on residential properties sold within two years of purchase would be taxed at up to 33 percent.

The kiwi dropped 1.23 percent to $0.7380. The greenback rose 1.23 percent to C$1.2155 against the Canadian dollar and rose to 120.01 yen, a gain of 0.63 percent . (Additional reporting by Patrick Graham in London; Editing by Andrea Ricci and James Dalgleish)