* Focus on Fed meeting next week

* Dollar gain sustainable in short term only -analyst

* Yen slips after BoJ meeting, but last flat on the day

By Gertrude Chavez-Dreyfuss and Elizabeth Howcroft

NEW YORK/LONDON, Jan 18 (Reuters) - The dollar rose to a one-week high on Tuesday following a jump in benchmark U.S. Treasury yields, while the yen steadied after initially sliding as the Bank of Japan said it would stick to its ultra-loose monetary policy.

The U.S. Federal Reserve meets next week and likely will signal that it will raise rates in March for the first time since the start of the coronavirus pandemic.

The fed funds futures have priced in four rate hikes in 2022.

As investors prepared for the possibility of the Fed being more hawkish than expected, Treasury yields jumped, with two-year yields - which track short-term rate expectations - crossing 1% for the first time since February 2020 US2YT=RR .

The U.S. 10-year yield also hit a two-year peak US10YT=RR of 1.856% overnight.

In line with Treasury yields, the dollar strengthened against a basket of currencies, hitting a one-week high of 95.638 =USD . It was last up 0.4% at 95.608.

"The dollar's gains are being driven by the fact that markets have shifted to the possibility that the Fed could tighten policy a lot faster than expected," said Chester Ntonifor, chief foreign exchange strategist at BCA Research in Montreal.

But Ntonifor noted that the dollar's gains are likely sustainable only in the short-term, about three to six months.

"To the extent that you have captured investors' minds that the Fed is going to be one of the more hawkish central banks in 2022 in raising interest rates, there are going to be these inflows into the dollar on speculative positioning," Ntonifor added.

The euro hit a one-week low of $1.1350 and was last down 0.5% at $1.1351 EUR=EBS .

German investor sentiment hit its highest in six months in January on expectations that COVID-19 cases will fall by early summer, allowing growth in Europe's largest economy to pick up, the ZEW survey showed.

As oil prices hit a seven-year high and global equity markets slumped, Germany's benchmark 10-year government bond yield came close to, but did not exceed, 0% DE10YT=RR .

YEN SLIPPED

The yen slipped against the dollar after the Bank of Japan said it would maintain its ultra-loose monetary policy even as its global counterparts move towards exiting crisis-mode policies.

By late morning trading, the dollar was flat against the yen at 114.55 JPY=EBS , with the pair having reached as high as 115.06 overnight.

"The widening divergence between BoJ and Fed policy expectations should continue to place upward pressure on USD/JPY," MUFG currency analyst Lee Hardman wrote in a note to clients.

The Australian dollar fell, down 0.2% on the day at US$0.7193 AUD=D3 . The New Zealand dollar was also down 0.3% NZD=D3 .

China's central bank, meanwhile, plans to do more to support growth, while steadily lowering financing costs and keeping the yuan exchange rate stable, the bank's vice governor said.

The central bank unexpectedly cut the borrowing costs of its medium-term loans for the first time since April 2020, with market analysts expecting more policy easing this year to cushion an economic slowdown.

The yuan hit its highest in more than three years versus the dollar, helped by trade settlement inflows. The dollar was last up 0.1% at 6.3525 yuan.

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Currency bid prices at 10:57AM (1557 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

95.6350

95.2260

+0.45%

-0.029%

+95.6560

+95.1260 Euro/Dollar

EUR=EBS

$1.1344

$1.1405

-0.53%

-0.22%

+$1.1421

+$1.1344 Dollar/Yen

JPY=EBS

114.5300

114.6100

-0.07%

-0.51%

+115.0550 +114.4550 Euro/Yen

EURJPY=

129.91

130.74

-0.63%

-0.31%

+131.1700 +129.9100 Dollar/Swiss

CHF=EBS

0.9167

0.9143

+0.26%

+0.50%

+0.9168

+0.9132 Sterling/Dollar GBP=D3

$1.3582

$1.3644

-0.45%

+0.43%

+$1.3661

+$1.3573 Dollar/Canadian CAD=D3

1.2521

1.2517

+0.03%

-0.97%

+1.2533

+1.2487 Aussie/Dollar

AUD=D3

$0.7188

$0.7211

-0.31%

-1.10%

+$0.7228

+$0.7176 Euro/Swiss

EURCHF=

1.0397

1.0426

-0.28%

+0.27%

+1.0439

+1.0399 Euro/Sterling

EURGBP=

0.8350

0.8356

-0.07%

-0.60%

+0.8378

+0.8351 NZ

NZD=D3

$0.6772

$0.6792

-0.28%

-1.04%

+$0.6807

+$0.6764 Dollar/Dollar

Dollar/Norway

NOK=D3

8.7915

8.7200

+0.74%

-0.28%

+8.7935

+8.7030 Euro/Norway

EURNOK=

9.9750

9.9458

+0.29%

-0.38%

+10.0161

+9.9313 Dollar/Sweden

SEK=

9.1102

9.0068

+0.50%

+1.04%

+9.1156

+9.0024 Euro/Sweden

EURSEK=

10.3350

10.2831

+0.50%

+0.99%

+10.3433

+10.2816

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World FX rates Link
USDJPY Link

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Reporting by Gertrude Chavez-Dreyfuss in New York and Elizabeth Howcroft in London; Editing by Ed Osmond,
Will Dunham and John Stonestreet