* Dollar drops against yen as Treasuries yields fall
* Investors turn risk averse before earnings season
* Focus on Fed meeting minutes due on Wednesday (Recasts with U.S. dollar moves, changes dateline; previousLONDON)
By Karen Brettell
NEW YORK, July 8 (Reuters) - The U.S. dollar fell againstthe Japanese yen on Tuesday as long-dated Treasuries yieldsdropped for a second day, with investors wary about riskierassets, including stocks, heading into the U.S. earnings season.
The dollar has erased the gains it made against the yen on astrong employment report last Thursday that showed the U.S.economy is continuing to gain strength. It has stabilized attwo-week highs against the euro.
Safety buying of long-dated Treasuries is seen as limitingdollar strength, at least in the near term, with investors waryabout the stock market at record levels heading into earningsseason.
"We've seen a bit of risk aversion in the market and thetendency for yields to fall in the U.S., and the dollar to fallin sync with it," said Sebastien Galy, senior foreign exchangeanalyst at Societe Generale (Paris: FR0000130809 - news) in New York. "It's driven byequities."
Two-year Treasuries note yields have risen abovethe key 0.50 percent level even as long-dated Treasuries yieldshave fallen, indicating near-term market jitters.
The dollar fell 0.24 percent against the yen onTuesday to 101.58 yen, down from 102.82 yen late on Monday. Itgained 0.05 percent against the euro to $1.3596. Thedollar has largely traded sideways against the euro for the pastthree days, after an initial rally on Thursday's U.S. jobs data.
The next major focus for the market will be the release onWednesday of minutes from the U.S. Federal Reserve's Junemeeting, which will be scoured for signs about when central bankmembers see an interest rate increase as likely.
Analysts see the dollar as unlikely to rally further unlessthere are stronger indications from the Fed that a rate hike islikely to come sooner than expected.
Jeffrey Lacker, president of the Richmond Fed, andMinneapolis Fed President Narayana Kocherlakota are both due tospeak on Tuesday.
The dollar index, which tracks the greenback againsta broad basket of currencies, fell slightly to 80.208, down froma high of 80.218 on Monday. (Editing by Peter Galloway)
- USA News