NEW YORK (Reuters) - The dollar dropped for a second straight session on Tuesday, with broader risk appetite turning more positive, as investors cheered comments from U.S. Treasury Secretary nominee Janet Yellen on the need for major fiscal stimulus. The dollar’s fall came after a 0.6% rise so far in 2021, which caught off guard many investors who had bet on a further decline following its weakness in 2020. The greenback has been helped in January by rising U.S. Treasury yields and some investor caution about the strength of the global economic recovery from the coronavirus pandemic. But most analysts are sticking with their calls for a weaker dollar from here. Yellen, appearing before the Senate Finance Committee on Tuesday, urged lawmakers to “act big” on the next coronavirus relief package, adding that the benefits outweigh the costs of a higher debt burden. “It looks like risk appetite is in better support today. Expectations go back to the idea of a swift fiscal U.S. stimulus,” said Simon Harvey, senior FX market analyst at Monex Europe in London. “There is an ongoing understanding that there is support for a large fiscal stimulus and wide bipartisan support in the Senate, as opposed to a lengthy reconciliation process,” he added. Yellen also said the dollar’s value should be determined by market forces, adding that the United States should oppose attempts by other countries to artificially manipulate currency values to gain trade advantage. That contrasts with outgoing Republican President Donald Trump, who often railed against dollar strength. Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a research note, however, that Yellen’s comments on the dollar won’t be able to reverse its weakening trend. He cited the Fed’s expansive monetary policy, which has kept interest rates at zero and likely to stay there for years, as one reason for the greenback’s expected weakness in 2021. The dollar index, which measures the currency against a basket of other currencies, dropped 0.3% to 90.531, still higher though than its more than 2-1/2-year low of 89.206 touched at the start of this month. U.S. dollar net shorts have also swelled to its largest since May 2011 last week, which could mean a pullback in selling the greenback amid extreme positioning levels. With the dollar weakening, the euro gained, rising 0.4% to $1.2121, largely shrugging off the fact that Italian Prime Minister Giuseppe Conte’s facing a confidence vote to stay in office. Conte’s government appeared to be on course to survive the vote More volatile and commodity-linked currencies such as the Australian dollar, also benefited from the weaker U.S. currency, with the Aussie up 0.1% at US$0.7693. Rising commodity prices in recent months have boosted currencies of countries with large commodity exports, such as Australia and Canada. Sterling rose 0.3% against the dollar to $1.3626 . The dollar rose 0.2% against the yen to 103.86 yen, still consolidating in a narrow range after hitting a one-month high of 104.40 last week. ======================================================== Currency bid prices at 3:02PM (2002 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index 90.5000 90.7680 -0.29% +0.00% +90.7680 +90.4010 Euro/Dollar $1.2125 $1.2077 +0.40% -0.77% +$1.2145 +$1.2075 Dollar/Yen 103.8850 103.6550 +0.25% +0.60% +104.0800 +103.6800 Euro/Yen 125.94 125.22 +0.57% -0.77% +126.2100 +125.2100 Dollar/Swiss 0.8888 0.8913 -0.29% +0.45% +0.8916 +0.8865 Sterling/Dollar $1.3629 $1.3588 +0.32% -0.22% +$1.3635 +$1.3581 Dollar/Canadian 1.2733 1.2754 -0.16% +0.00% +1.2763 +1.2716 Aussie/Dollar $0.7693 $0.7685 +0.12% +0.02% +$0.7725 +$0.7675 Euro/Swiss 1.0776 1.0755 +0.20% -0.29% +1.0781 +1.0757 Euro/Sterling 0.8893 0.8886 +0.08% -0.49% +0.8918 +0.8884 NZ $0.7112 $0.7113 +0.01% -0.93% +$0.7140 +$0.7103 Dollar/Dollar Dollar/Norway 8.5395 8.5895 -0.61% -0.58% +8.5940 +8.5200 Euro/Norway 10.3561 10.3695 -0.13% -1.06% +10.3890 +10.3340 Dollar/Sweden 8.3518 8.3703 -0.09% +1.90% +8.4053 +8.3140 Euro/Sweden 10.1264 10.1360 -0.09% +0.50% +10.1497 +10.0890