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· Dollar hovers below two-month highs ahead of U.S. payrolls report

The dollar edged up on Tuesday toward a two-month high versus major counterparts, with traders largely sidelined ahead of a key U.S. jobs report that could alter the timing of an exit from Federal Reserve stimulus.

The dollar index, which tracks the greenback against a basket of six major currencies, added 0.1% to 91.966 in Asia, slowly closing the gap to the high of 92.408 reached on June 18 after the Federal Open Market Committee shocked markets by predicting two interest rate hikes by end-2023.

The Fed commentary since then has put the focus on the data to determine when a tapering of asset purchases and higher rates would be appropriate, with Chair Jerome Powell saying a weak ago that policymakers would not act on just the "fear" of inflation, and will encourage a "broad and inclusive" job market recovery.

Investors are also looking at U.S. consumer confidence data on Tuesday and the Institute for Supply Management's manufacturing index on Thursday for clues as to where interest rates are headed.

The dollar weakened 0.06% to 110.545 yen, staying below a nearly 13-month high of 111.110 reached last week.

Both the dollar and yen benefited from some safe-haven demand as the more contagious Delta COVID-19 strain spread in Asia and elsewhere, stoking fears of further lockdowns.

The euro declined 0.07% to $1.19145, edging back toward the 2-1/2-month low of $1.8470 touched on June 18.

Elsewhere, sterling slipped back toward a two-month low, weakening 0.06% to $1.38695.

The Australian dollar, seen as a liquid proxy for risk appetite, fell 0.09% to $0.75580 after sliding 0.31% at the start of the week amid concerns over renewed COVID-19 lockdowns across parts of the country.

The kiwi dollar dropped 0.19% to $0.70280, adding to its 0.40% slide on Monday. Previously it enjoyed a five-day winning run after rebounding from the lowest level since November.

· Yuan eases, traders hold off on bets before U.S. data, CPC's 100th anniversary

China's yuan eased against the dollar on Tuesday, though trading was stuck in an extremely tight range as many investors moved to the sidelines awaiting key U.S. economic data for clues on the Federal Reserve's policy outlook.

The ongoing plans for celebrating the 100th anniversary of the Chinese Communist Party on July 1 also kept markets in check, traders said, noting that domestic financial markets were usually stable before and during key economic and political events.

Prior to market opening on Tuesday, the People's Bank of China (PBOC) set the midpoint rate at a one-week high of 6.4567 per dollar, 11 pips firmer than the previous fix of 6.4578.