* Longer-dated U.S. Treasury yields drop from multi-year highs overnight
* Dollar index comes off seven-week high hit in U.S. trade
* Sterling lifted by DJ report of Brexit deal by Monday
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Daniel Leussink
TOKYO, Oct 10 (Reuters) - The dollar slipped further from seven-week highs on Wednesday after U.S. Treasury yields edged lower overnight while sterling took some comfort on hopes Britain and the European Union might be close to a Brexit deal.
The greenback’s rally against its major peers paused despite looming uncertainty over a slate of issues, including the intensifying Sino-U.S. trade dispute and Italy’s budget plans.
The dollar index was largely unchanged at 95.644, not far off 96.163 reached during the previous session - its highest level since Aug. 20.
“The rising U.S. bond yields have obviously provided support to the dollar,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.
“On the short-term, the dollar may be sold, but I don’t think that will last long. The dollar will start to strengthen again.”
The euro got a lift from a Dow Jones Newswires report that an agreement on the terms for Britain to leave the economic bloc may be reached as soon as Monday.
Dow Jones, citing unidentified diplomats, said Britain and the EU had narrowed their differences around the Irish border but some issues have not been resolved.
The pound gained 0.1 percent to a near two-week high of $1.3156, after tacking on 0.4 percent during the previous session.
The euro added 0.1 percent to $1.1507.
The single currency slipped overnight to a seven-week low of $1.14325 after yields on Italy’s 10-year paper hit a 4-1/2 year high, despite comments from Italian Economy Minister Giovanni Tria.
Tria said that Italy will do whatever is necessary to restore calm if market turbulence turns into a financial crisis, adding fears over the country’s budget plan for next year were unjustified though his remarks failed to reassure investors.
The European Commission warned last week that Italy’s deficit plans represented “a significant deviation from the fiscal path recommended by the Council”.
Against the Japanese yen, the euro rose 0.17 percent to 130.04 yen, after touching a four-week low during the previous session.
Yields on the benchmark 10-year Treasury paper stood at 3.21 percent on Wednesday, after hitting a seven-year top of 3.261 percent overnight.
The Australian dollar pulled 0.2 percent higher to $0.7117, away from a 32-month trough of $0.7041 hit early this week.
The dollar gained 0.05 percent to 113.02 yen.
The Chinese yuan held steady near a seven-week low against the greenback after a liquidity squeeze in the offshore yuan market in Hong Kong on Tuesday helped stabilise sentiment.
In early Asian trade, the Chinese offshore yuan was little changed on the day, edging higher to 6.9125 yuan per dollar. (Editing by Shri Navaratnam)