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FOREX-Dollar rises with U.S. yields, euro recovers from lows

* Dollar rebounds from 3-month lows versus euro, yen

* FOMC minutes hint rate hike in 2015, lift U.S. yields

* Above-forecast jobless claims cap dollar's gains

* Euro steadies after German PMI survey (Updates market action, adds new quote)

By Richard Leong

NEW YORK, May 22 (Reuters) - The U.S. dollar rose against major currencies on Thursday as higher U.S. bond yields revived appeal for the greenback, while the euro rebounded from recent lows on upbeat economic data.

Benchmark U.S. yields rose to their highest levels in more than a week as minutes of the Federal Reserve's April 29-30 policy meting, released on Wednesday, hinted it will stay on course to scale back its bond-purchase stimulus.

"Overall it reaffirmed the major theme the Fed will continue to tape. It means higher U.S. rates in 2015 which should be supportive for the dollar," said Alfonso Esparza, senior currency strategist at Oanda in Toronto.

The dollar's gains were limited by a bigger-than-expected rise in U.S. weekly jobless claims, while the shared currency has remained pressured by bets the European Central Bank will loosen monetary policy next week to avert deflation.

The yen, which had fared well on worries about the global economy and conflict in the Ukraine, broadly underperformed as investor sentiment improved.

The dollar index that gauges its value against the euro, yen and four other currencies was up 0.19 percent at 80.24.

The euro fell 0.2 percent versus the greenback at $1.3652 , holding above a three-month low of $1.36345 on Wednesday, while the dollar gained 0.4 percent against the yen at 101.79 yen after hitting a 3-1/2-month low against the yen a day earlier.

U.S. 10-year Treasury yields, which have a good correlation with the dollar/yen pair, climbed to 2.56 percent. Last week, they hit 2.473 percent, the lowest since October.

The greenback's rise was held back by a larger-than-forecast rise in weekly domestic first-time for unemployment benefits, raising doubts about another month of strong payroll gains.


The euro, while weaker against the dollar, firmed against the yen at 138.98 yen, recovering from a 3-1/2 month low of 138.15 yen set on Wednesday.

The euro had fallen early in the London session after data showed French business activity unexpectedly shrinking in May, but quickly recovered ground after the German purchasing managers' index was released.

This left the euro zone composite PMI for May at 53.9, in line with forecasts and a shade below April's 54. Still the data pointed to quarterly growth of around 0.3-0.4 percent, some economists said.

"True, it points to some growth, but it's not really enough," said Peter Kinsella, currency strategist at Commerzbank in London. "There are deflationary forces in play and we expect the European Central Bank to cut rates next month, perhaps negative rates too." (Additional reporting by Anirban Nag and Patrick Graham in London; Editing by Bernadette Baum and Nick Zieminski)