* Deal to avoid US govt shutdown lifts dollar sentiment
* Investors warily monitor developments in North Korea
* Liquidity seen thin before Japan’s Golden Week holidays
* Fed meeting, U.S. jobs data awaited this week
TOKYO, May 1 (Reuters) - The dollar shrugged off early modest losses in holiday-thinned Asian trading on Monday, while solid European inflation data underpinned the euro.
Several markets across Asia and Europe were closed for the May Day holiday. Tokyo markets will be closed for three days from Wednesday for a string of holidays known as Golden Week, and many investors take additional time off.
The dollar index, which tracks the greenback against a basket of six rival currencies, edged up 0.1 percent to 99.144 .
Bolstering dollar sentiment, U.S. congressional negotiators have hammered out a bipartisan agreement on a spending package to keep the federal government funded through the end of the current fiscal year on Sept. 30, a senior congressional aide said on Sunday.
The House of Representatives and the Senate must approve the deal before the end of Friday and send it to President Donald Trump for his signature to avoid the first government shutdown since 2013.
“It is hard for markets to make big moves with holidays in so many places today, and people are just waiting for more information to come out,” said Harumi Taguchi, principal economist at IHS Markit in Tokyo.
Against its Japanese counterpart, the dollar nudged 0.1 percent higher to 111.68.
U.S. Labor Department data on Friday showed private wages and salaries accelerated 0.9 percent in the first quarter to mark the largest increase in 10 years, suggesting the U.S. Federal Reserve might still hike interest rates two more times this year.
The firm wage growth helped offset news on Friday that the U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled.
“Dollar/yen is holding up, despite the weaker U.S. GDP,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo, as U.S. Treasury yields rose.
The yield on benchmark 10-year Treasury notes was at 2.298 percent in Asian trading, up from its U.S. close of 2.282 percent on Friday.
But market participants continued to watch for any developments around North Korea, limiting losses for the perceived safe-haven yen.
On Sunday, U.S. President Donald Trump increased diplomatic contacts with allies in Asia to secure their cooperation to pressure North Korea over its nuclear bomb and missile programs.
The Fed will meet on Wednesday this week, with no policy change expected, while the U.S. employment report for April will be issued on Friday.
The euro was steady on the day at $1.0894, underpinned by solid euro zone inflation figures on Friday that analysts said could prompt the European Central Bank to take a more hawkish tone in its June statements.
Official flash estimates put euro zone inflation at 1.9 percent in the first quarter, above estimates of 1.8 percent. The ECB’s target is below but close to 2 percent.
Short positioning in euro eased in the week ended April 25, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday, after independent centrist Emmanuel Macron came out ahead of anti-European Union rightist Marine Le Pen in the first round of the French election last weekend. The runoff vote will be held on Sunday.
Meanwhile, net shorts on the Canadian dollar that week ballooned to 42,642 contracts, the largest since early February 2016 as the United States worked to renegotiate the terms of its NAFTA deal with Canada and Mexico.
The dollar edged up 0.1 percent against the Canadian dollar on Monday to C$1.3673 after logging a 14-month high of C$1.3697 on Friday.
The Australian dollar inched down slightly to $0.7484, moving back toward last week’s low of $0.7440, which was its weakest since mid-January. It posted a loss of 1.8 percent in April, the largest monthly loss this year.
The Reserve Bank of Australia (RBA) will hold its monthly policy meeting on Tuesday and is considered certain to hold rates at a record low 1.5 percent following two cuts last year. (Reporting by Tokyo markets team; Editing by Eric Meijer)