* Fed Chair to speak in London later on Tuesday
* Euro retakes some ground lost on dovish Draghi remarks
* Fed officials stick to hawkish message
By Lisa Twaronite
TOKYO, June 27 (Reuters) - The dollar rose on Tuesday to its highest level against the yen in nearly five weeks ahead of comments from Federal Reserve Chair Janet Yellen that are expected to underline her positive view of the U.S. economic outlook.
She is scheduled to take part in a discussion later on Tuesday at London’s Royal Academy. A positive view despite a recent batch of weak U.S. economic data would support the Fed’s forecast for another rise in policy rates this year.
“Hedge funds are already selling yen this week, and positive comments from Yellen could give them an excuse to sell even more,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The dollar rose to 112.075 yen earlier on Tuesday, its highest level since May 24. It was last at 111.88 yen, up slightly on the day.
U.S. data on Monday gave investors reason to be cautious about buying the dollar. New orders for key U.S.-made capital goods unexpectedly fell in May and shipments also declined, suggesting a loss of momentum in the manufacturing sector halfway through the second quarter.
“Even after the break of the 112 level, the dollar didn’t show any strong upward momentum,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
After the weak data raised concerns about falling inflation and lacklustre growth, long-dated U.S. Treasury bond yields dropped to seven-month lows and the yield curve between five-year notes and 30-year bonds narrowed to its flattest level since 2007.
U.S. 10-year Treasury yields were at 2.138 percent in Asian trading, little changed from a U.S. close on Monday of 2.137 percent.
Fed officials have stuck to their hawkish scripts.
San Francisco Fed President John Williams said in Sydney on Monday that a slowdown in U.S. inflation was mainly due to one-off factors and should not prevent further increases in interest rates.
Financial conditions have loosened in the past year despite the Fed raising interest rates three times since December, which is another reason to continue tightening, New York Fed President William Dudley said in remarks published on Monday.
The euro rose 0.1 percent to $1.1188, moving up from its overnight low of $1.1172 reached after dovish comments from European Central Bank President Mario Draghi, which contrasted sharply with those of Fed officials.
In a town-hall with university students in Lisbon, Draghi said super low interest rates create jobs, foster growth and benefit borrowers. He rejected calls to exit super easy monetary policy quickly, arguing premature tightening would lead to a fresh recession and more inequality.
The dollar index, which tracks the greenback against a basket of six major rivals, inched 0.1 percent lower on the day to 97.367. (Reporting by Tokyo markets team; Editing by Neil Fullick)