* Dollar index scales fresh 11-year peak
* Yield spike on Wall Street rally, mixed data help dollar
* Aussie shaky as market eyes rate cut risk (Updates details, adds quotes)
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, March 3 (Reuters) – The dollar hit a fresh 11-year peak against a basket of major currencies on Tuesday, as rising Treasury yields helped it prevail over its peers.
The dollar index climbed as far as 95.516, surpassing the previous peak of 95.481 set on Jan. 23. It reached a high not seen since September 2003.
The index rose as the euro slid back below $ 1.1200 and as the greenback hit a near three-week high of 120.19 yen .
The euro zone common currency was last up 0.1 percent at $ 1.1191 and the dollar fetched 119.94 yen, down 0.2 percent.
Underpinning the greenback, U.S. Treasury yields rose with the benchmark 10-year note nearing 2.10 percent, pulling away from last week’s low of 1.93 percent.
In addition to Wall Street shares hitting fresh record highs on Monday, a batch of mixed data overnight was seen by some as a driving the rise in Treasury yields.
U.S. private income and the personal consumption expenditures (PCE) index rose modestly while consumer spending and housing data proved weak.
“The data proved mixed, but relatively firm inflation figures caught the market’s eye. It still remains to be seen if prices will go on an uptrend. But if data continue to suggest that prices have at least bottomed out, it will support the case for a summer rate hike,” said Bart Wakabayashi, head of forex at State Street in Tokyo.
Last week dollar bulls were initially disappointed by perceived dovish signals from Federal Reserve Chair Janet Yellen but took heart again after data showed U.S. core inflation rose more than expected.
“Our economists continue to expect the first fed funds rate hike in September of this year and see the FOMC dropping the ‘patient’ reference at the March policy meeting,” analysts at BNP Paribas wrote in a note to clients.
In contrast, the market appears to be betting the Reserve Bank of Australia will likely deliver a back-to-back interest rate cut later on Tuesday.
As a result, the Aussie dollar has fallen back to $ 0.7765 from a recent high of $ 0.7914.
Traders said an ‘on hold’ decision by the RBA should spark a short-covering rally in the Aussie. Conversely, a cut accompanied by a dovish statement could see it fall towards a six-year trough of $ 0.7627 set a month ago.
Economists polled by Reuters late last week were just about evenly split on whether the RBA will lower the cash rate by another quarter point to a record low 2.0 percent.
(Editing by Eric Meijer)