* Dollar index down from Friday's 3-1/2 month peak
* Pullback in U.S. 10-year yield dents dollar's momentum
* Dollar/yen on track for biggest monthly gain since 2016
* Fed policy meeting, U.S. jobs data coming up this week(Updates prices)
By Masayuki Kitano
SINGAPORE, April 30 (Reuters) - The dollar held steadyagainst a basket of major currencies on Monday after pullingback slightly from a 3-1/2-month high last week, pressured by adecline in the benchmark U.S. 10-year Treasury yield.
The dollar's index against a basket of six major currenciesstood at 91.561, steady on the day but down from Friday'shigh of 91.986, its strongest level since Jan. 11.
The dollar index had risen more than 1.3 percent last weekfor its biggest weekly gain in over two months, after the U.S.10-year Treasury yield rose above the psychologically key 3.0percent threshold to four-year highs.
The U.S. 10-year yield has since come off that peak and fell3 basis points on Friday to 2.957 percent, down froma four-year high of 3.035 percent struck on Wednesday.
Earlier this year, the correlation between U.S. yields andthe dollar had broken down as investors focused more on tradefrictions and geopolitical issues.
Markets, however, have recently turned their attention backto interest rate plays as concerns over the U.S.-China tradedispute and tensions over North Korea's nuclear programme eased,giving the greenback a leg up.
The dollar inched up 0.1 percent to 109.12 yen, having set a2-1/2 month high of 109.54 yen on Friday. But trade was thinwith Japanese markets closed for a holiday.
The dollar has risen more than 2.6 percent against the yenin April, putting it on track for its best monthly performancesince November 2016.
"The dollar has come a long way, and my sense is that itdoesn't have the strength to break above 110 yen for now," saidSatoshi Okagawa, senior global markets analyst for SumitomoMitsui Banking Corporation in Singapore.
At the same time, with concerns over geopolitical riskseasing, the dollar's downside risks against the yen also appearlimited, Okagawa said, adding that the greenback was unlikely tofall back to the 107-yen handle in the near term.
Some analysts say moves among Japanese investors to increasetheir foreign currency exposure at the start of Japan's newfinancial year have likely contributed to the yen's weakness inApril.
Another factor that is seen as having weighed on the yenrecently is speculation about the potential for eventualyen-selling flows related to Japanese drugmaker TakedaPharmaceutical's $64 billion bid to buy London-listedShire Plc.
Events and data coming up this week include the U.S. FederalReserve's May 1-2 policy meeting, at which the central bank iswidely expected to keep interest rates unchanged, as well asU.S. jobs data due on Friday.
"This week's U.S. nonfarm payroll number will go a long wayto cementing the dollar's near-term trend," Stephen Innes, headof trading in Asia-Pacific for Oanda in Singapore, said in anote.
In addition, a delegation of U.S. officials, includingTreasury Secretary Steven Mnuchin and President Donald Trump'stop economic and trade advisers - Larry Kudlow, RobertLighthizer and Peter Navarro - are all expected in China laterthis week for trade negotiations.
The euro held steady at $1.2125, having recoveredfrom a 3-1/2-month low of $1.2055 set on Friday.
Sterling eased 0.1 percent to $1.3780.
On Friday, the British pound had set a near two-month low of$1.3748 on Friday after Britain's economy slowed far more thanexpected in the first quarter of 2018, slashing expectations theBank of England will raise interest rates in May.(Reporting by Masayuki Kitano; Editing by Sam Holmes and KimCoghill)
