FOREX-Dollar in doldrums as recovery optimism thrives

* Sterling hits three-year high on vaccine progress

* Yuan heads toward 6.4/dollar barrier

* Yen languishes as investors seek riskier bets

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Tom Westbrook

SINGAPORE, Feb 16 (Reuters) - The U.S. dollar fell to athree-week low on Tuesday, sterling hit an almost three-yearhigh and commodity currencies rose as vaccination progress addedto investors' recovery hopes.

The buoyant mood, and a sell-off in U.S. Treasuries, alsodragged on the safe-haven Japanese yen, which fellthrough its 200-day moving average against the dollar and struckmulti-year lows against the euro, Aussie and Swiss franc.

The yen last traded 0.2% weaker at 105.53 per dollar. Thedollar index, which measures the greenback against abasket of majors, fell 0.1% to 90.240, its lowest since Jan. 27and the euro hit its highest since that date.

The dollar traded near milestone lows against othercurrencies.

The Chinese yuan was on the brink of rising past6.4 per dollar for the first time since mid-2018. Therisk-sensitive Australian dollar hit a one-month highof $0.7802 and the kiwi made a five-week peak of$0.7257.

"It's a risk-on, weaker-dollar mood taking over," said Bankof Singapore currency analyst Moh Siong Sim, as investors focuson a global bounce back in growth, inflation and spending.

He said investors were weighing up whether the recoverywould be U.S.-led, which could support the dollar, or muchbroader, and thus negative for the greenback as global tradepicks up.

"Things right now reflect greater comfort with the story ofa synchronised global recovery, which is why we are seeing aweaker dollar," he said.

Sterling, which has led the charge, extended gains tohit $1.3946, its highest level since April 2018 as Britain leadsthe world in per-capita vaccination speed. The currency hasgained almost 3% from early-February lows.

The euro crept 0.2% higher to $1.2150 to re-testrecent resistance at that level. Rising oil prices lifted theCanadian dollar and Norwegian crown tomulti-week highs.

Soaring bitcoin hovered just short of $50,000, asprofit-taking arrested a steep rally which has driven thecryptocurrency over 60% higher so far in 2021.

YIELDS AND YEN

Besides the dollar, the Japanese yen has been the othercasualty of the broad rally in financial markets and it hit aone-week low on Tuesday.

Recent equity gains - global stocks have climbed for a dozendays straight - have been matched by growing expectations forhigher inflation, especially as central banks keep promising tokeep rates low for a long time.

Those expectations were further boosted by a jump in oilprices this week, as a cold snap shuts Texan wells, and havedriven U.S. Treasury yields to their highest since March.

That can affect the yen because Japanese investors areacutely sensitive to any rise in nominal U.S. yields, especiallyas they extend above anchored Japanese returns.

Benchmark ten-year U.S. yields are now 33 basispoints higher for the year so far and the yen about 2% lower.

The yen also hit its lowest since late 2018 against the euroand the Australian dollar and hit afive-year low of 118.80 yen per Swiss franc.

"The yen has been the worst performing currency of 2021,with its negative correlation to U.S. Treasury yields proving tobe the biggest dampening factor," said Francesco Pesole,currency strategist at Dutch bank ING in a note to clients.

"When adding weak safe-haven demand as the global recoverygathers pace, some additional trimming of yen net long positionsmay be on the cards."

Ahead on Tuesday, investors are looking to euro zone growthestimates, a German sentiment survey and U.S. manufacturing datato gauge the relative pace of the world's pandemic recovery.

(Reporting by Tom Westbrook; Editing by Sam Holmes and AnaNicolaci da Costa)