FOREX-Dollar touches 11-year peak as euro gains fade

* Dollar at 3-week high vs yen

* All eyes on ECB preparations for quantitative easing

* ECB policymakers meet in Cyprus on Wednesday, Thursday (Adds New York trading, quotes; changes byline and dateline, previous LONDON)

By Michael Connor

NEW YORK, March 2 (Reuters) – The dollar rose in choppy trading on Monday, with an index that tracks the greenback against major currencies touching an 11-year peak.

The euro, which has been in an extended slump, had been up by as much as a third of a percent against the dollar but surrendered gains and traded near unchanged at just under $ 1.12.

The yen was off 0.45 percent at 120.07 yen to the dollar in late-morning New York trade. That marked a three-week high for the dollar against the yen.

The dollar index was last up 0.14 percent at 95.427 after earlier going as high as 95.505, its highest since September 2003.

“The dollar’s long-term trend is up but it now is in some consolidation,” said Paul Christopher, international strategist at Wells Fargo in St Louis. “There is developing expectation Europe and Japan will improve their growth rates this year and that will narrow the lead for the U.S. economy.”

The dollar has been steadily rising, largely because America’s economic outlook is stronger than those of other big countries and bond buyers expect the Federal Reserve to soon start raising interest rates for the first time since 2006.

The euro was higher against the dollar briefly on Monday on the back of marginally stronger economic numbers before the start of the European Central Bank’s quantitative easing program later this month.

ECB policymakers meet in Cyprus on Wednesday and Thursday, just one of several central bank meetings that will be watched this week in global markets for interest-rate policy shifts.

The ECB is expected to lay out more details of the program at a news conference on Thursday.

The euro was bolstered by stronger purchasing manager surveys out of Germany and Italy as well as a slightly smaller fall in the first estimate of February inflation.

The dollar had been up strongly in early Asian trading driven by a Chinese rate cut over the weekend.

The Australian dollar was a big loser, down 0.40 percent against the U.S. dollar, on speculation that China’s rate cut had increased the probability of a second reduction in as many months by the Reserve Bank of Australia on Tuesday.

“After the change in tone by (Federal Reserve chief) Janet Yellen last week, it looks like the market wants to be positive on the dollar,” said Ian Stannard, head of European FX strategy at Morgan Stanley in London.

(Additional Reporting By Patrick Graham in London; Editing by Peter Galloway)