* Dollar gains on yen, falls against sterling and loonie * Euro steady at $1.219 * Markets look toward Friday U.S. inflation data * Sterling gets lift from comments on rate hike timing * Chinese yuan continues recent rally * Graphic: World FX rates tmsnrt.rs/2RBWI5E (Revises throughout, updates prices, market activity) By David Henry NEW YORK, May 27 (Reuters) - The dollar index traded in a narrow range on Thursday as the greenback held steady against the euro, lost ground to the British pound and Canadian dollar and gained on the Japanese yen. The diverging performances in the currencies came with changes in economic outlooks for their home countries and evolving views on when, and by how much, different central banks will pull back on easy money policies to control inflation in their recoveries from the COVID-19 pandemic. In early afternoon in New York, the dollar had gained about 0.7% on the yen, and lost 0.5% to the Canadian dollar . Sterling picked up 0.5% to $1.419 and the euro was little changed at $1.219. The dollar index was down 0.1% for the day, holding on to most of a 0.4% gain on Wednesday. The moves came as new U.S. economic data on Thursday showed a greater than expected decline in new unemployment claims and an acceleration in business spending on equipment. Also supporting the dollar, U.S. Treasury yields rose on concerns about the coming supply of government debt after the New York Times reported that President Joe Biden will announce on Friday a $6 trillion budget for 2022. The yield on the 10-year note was up to 1.613 in the afternoon from 1.574 on Wednesday. The yen, trading at 109.84 to the dollar, has lost 1% in two days since the Japanese government slashed its economic outlook for the first time in three months. The British pound rose suddenly when a Bank of England policymaker said the central bank is likely to raise interest rates well into next year but that an increase could come earlier. "The market is reacting to a hawkish headline and that"s why we saw sterling gallop," said Erik Bregar, head of FX strategy at Exchange Bank of Canada. Sterling"s strength helped to lift the Canadian dollar against the greenback, Bregar added. The Bank of Canada has been quicker than other central banks to pull back support for economic growth. China"s yuan appreciated to as much as 6.368 per dollar in offshore markets, a three-year high. Investors have been raising their bets on further strength, confident that the People"s Bank of China is not displaying discomfort with the rally. Market attention now turns to U.S. inflation data due on Friday. A jump in prices could be seen as prompting the Fed to scale back its easy money policies. Economists expect the data to show that core PCE (personal consumption expenditures) prices jumped 2.9% year-on-year in April, compared with a year-on-year rise of 1.8% a month earlier. Cryptocurrency bitcoin was down less than 1% and ether had lost nearly 4%. ======================================================== Currency bid prices at 1:33PM (1733 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index 90.0040 90.0730 -0.07% 0.026% +90.1790 +89.8920 Euro/Dollar $1.2196 $1.2192 +0.04% -0.18% +$1.2215 +$1.2176 Dollar/Yen 109.8400 109.1350 +0.66% +6.32% +109.9200 +109.0400 Euro/Yen 133.95 133.07 +0.66% +5.54% +133.9800 +132.9300 Dollar/Swiss 0.8967 0.8979 -0.11% +1.38% +0.9008 +0.8964 Sterling/Dollar $1.4187 $1.4121 +0.47% +3.84% +$1.4196 +$1.4092 Dollar/Canadian 1.2070 1.2127 -0.46% -5.21% +1.2142 +1.2057 Aussie/Dollar $0.7735 $0.7742 -0.10% +0.55% +$0.7757 +$0.7723 Euro/Swiss 1.0934 1.0949 -0.14% +1.18% +1.0977 +1.0936 Euro/Sterling 0.8595 0.8633 -0.44% -3.83% +0.8646 +0.8596 NZ $0.7291 $0.7283 +0.07% +1.49% +$0.7311 +$0.7266 Dollar/Dollar Dollar/Norway 8.3505 8.3620 +0.08% -2.54% +8.3880 +8.3380 Euro/Norway 10.1863 10.1890 -0.03% -2.68% +10.2208 +10.1720 Dollar/Sweden 8.2728 8.3131 -0.45% +0.93% +8.3293 +8.2756 Euro/Sweden 10.0906 10.1360 -0.45% +0.15% +10.1457 +10.0923 (Reporting by David Henry in New York and Tommy Wilkes in London Editing by Peter Graff and Jane Merriman) Our Standards: The Thomson Reuters Trust Principles.