(Updates prices, adds comment)
* Yen gains on global political uncertainty
* Euro up vs dollar, but outlook down overall
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 8 (Reuters) - The dollar fell on Wednesday after two days of gains, pressured by the decline in U.S. Treasury yields as investors have priced out a March rate hike by the Federal Reserve amid uncertainty about President Donald Trump’s economic policies.
“Any continued dovish hesitation on the part of the Fed in normalizing monetary policy, combined with the Trump administration’s concerted push to weaken the dollar against its major rivals, could very well lead to further downside for the dollar, at least in the short term,” said James Chen, head of research at Forex.com in Bedminster, New Jersey.
Concerns about the impact on the world economy of Trump’s protectionism and immigration policy have also undermined the greenback.
Trump will meet Japanese Prime Minister Shinzo Abe this week and the U.S. president is likely to reiterate his opposition to a strong dollar and a weak yen, which could further push the dollar lower.
The safe-haven yen, meanwhile, rose amid concerns around global political risks in Europe with the onslaught of elections this year in France, Germany, Netherlands, and possibly Italy, and pushing U.S. Treasury yields lower.
U.S. benchmark 10-year Treasury note yields fell to a three-week low of 2.325 percent on Wednesday.
The euro also inched higher against the dollar from more than one-week lows, on short-covering after days of losses. But its fortunes over the last few days have been largely tied to developments in France’s looming presidential elections.
“The French political noise has brought the euro down and that has given the dollar a reprieve,” said Gavin Friend, a strategist with National Australia Bank in London.
“Markets know that if Trump was to come out and start talking about tax reform and infrastructure spending, the dollar would go up,” he added.
In late trading, the dollar index fell 0.2 percent to 100.27 , as the greenback slid 0.3 percent to 112.05 yen.
The euro was down 0.3 percent against the yen at 119.76 yen , and was up 0.1 percent versus the dollar at $1.0687 .
Uncertainty about the two rounds of the French presidential election on April 23 and May 7 drove the premium that investors demand for holding French over German government debt to its highest in more than four years.
Opinion polls show centrist Emmanuel Macron slightly ahead of conservative Francois Fillon in the first round, but behind far-right National Front leader Marine Le Pen, who has vowed to pull France out of the euro zone and hold a vote on its membership in the European Union.
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by Tom Brown