* Dollar dips marginally, commodity currencies hold gains * Sterling edges higher ahead of UK budget * Graphic: World FX rates tmsnrt.rs/2RBWI5E (Adds new quote, details, latest prices) LONDON, March 3 (Reuters) - The U.S. dollar fell on Wednesday as investor sentiment improved and government bond yields extended their retreat, while commodity-linked currencies such as the Australian and Canadian dollars held on to recent gains. Lower U.S. bond yields also sapped some of the dollar’s appeal among low-yielding currencies, with the yen and Swiss franc recovering from multi-month lows overnight. A jump in government bond yields in recent weeks has rattled financial markets. Investors scaled up their bets that economic recovery, helped along by a big U.S. fiscal stimulus package, would lift inflation and lead central banks to normalise monetary policy as economies recover from the COVID-19 pandemic. Global stocks dropped from near record highs and prices of commodities wobbled. But this week has seen some calm return to the market, with yields dropping and stocks rebounding. An index of the dollar against six of its major peers slipped to 90.975 after dropping back from a nearly one-month high overnight. Analysts said they expected Federal Reserve Chair Jerome Powell to reiterate on Thursday recent comments by fellow policymaker that any rises in rates would be gradual and that the U.S. economy was still far from the bank’s goals. “The Fed is rightly more concerned about the speed of the move rather than the move higher in yields. The comments should help to dampen volatility in the bond market and the U.S. dollar’s upward momentum in the near-term,” MUFG analysts said in a note. Sterling traded 0.1% higher at $1.3972 before the UK budget release, the big event of the day, due at 1230 GMT. The Aussie held flat on the day at $0.7819, keeping its gains of about 0.7% the previous two days, after data showed the Australian economy grew much faster than expected in the fourth quarter. The Norwegian crown , another commodity-linked currency, strengthened versus the dollar and the euro after advancing in each of the past two sessions. The euro was little changed at $1.2088 after rising more than 0.3% in the previous session, when it rebounded from an almost one-month low below $1.20. European Central Bank board member Fabio Panetta said the bloc’s monetary authority should expand bond purchases or even increase the quota earmarked for them if needed to keep yields down. The euro extended its run against the Swiss franc and was close to last week’s 19-month highs The franc has fallen as investors dumped the safe-haven currency. On Wednesday the euro rose 0.2% to 1.1085 francs , bringing its year-to-date gains to 2.5%. Marshall Gittler at BDSwiss said while the euro/franc exchange rate was not typically aligned with European equities, it has been tracking the move higher in European stocks and the weaker performance of Swiss shares. “Recently [Swiss stocks have] been underperforming, which tends to go along with a weaker CHF as Swiss investors move money into the better-performing markets,” he said.