* Treasury's Yellen says U.S. interest rates may need to rise
* Commodity currencies slump against the dollar
* Ethereum , dogecoin hit record highs
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E (Adds dogecoin, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 4 (Reuters) - The dollar hit a two-week high on Tuesday, as risk appetite faded amid a sell-off in stocks, with U.S. Treasury Secretary Janet Yellen's comments saying interest rates may need to rise to prevent the American economy from overheating also supporting the greenback.
Yellen, in prepared remarks on Tuesday, made the comment as more of U.S. President Joe Biden's economic investment programs come on line. She did say that the additional spending was small compared to the relative size of the economy. dollar's safe-haven appeal received a further boost as the Nasdaq fell more than 2% .IXIC , the S&P more than 1% .SPX and the Dow Jones Industrial Average a less steep 0.3% .DJI , and as Treasury yields declined. .N US/
Analysts said much of the good news on the economy has likely been priced in by the market.
"After improving dramatically through the first quarter, U.S. economic expectations have converged with reality, meaning that surprises are no longer skewed toward the positive," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
"For many investors and momentum traders, some rebalancing, away from risk-sensitive currencies and toward havens, is making a lot of sense at this juncture," he added.
Tuesday's bounce reversed losses sustained on Monday after a disappointing U.S. manufacturing survey report, leaving the dollar 1% above a one-month low struck last week.
The dollar index =USD , which measures the dollar's value against a basket of other major currencies, climbed 0.3% to 91.278. It fell more than 2% in April.
"There is no consensus right now on what will happen to the dollar for the rest of the year, as there was at the start," Tempus Inc said in its latest research note.
"While some traders see the U.S. dollar with room to grow because of bond yields going higher in the future as inflation expectations grow, others believe the buck is now overvalued and will only keep dwindling as the rest of the world successfully plays catch-up."
The U.S. dollar gained 0.8% against the Australian dollar to US$0.7704 AUD=D3 and 0.9% versus the New Zealand dollar NZD=D3 to US$0.7138, even though commodity prices were generally firmer across the board.
Sterling GBP=D3 dipped 0.1% to $1.3881 ahead of a Bank of England meeting on Thursday, which may announce a slowdown in its bond buying program as the vaccine rollout bolsters Britain's economy.
In the cryptocurrency sector, ethereum ETH=BTSP powered to another record peak of $3,530 on Tuesday, amid increasing institutional interest. It was last down 1.7% at $3,370.
Dogecoin, created as a joke for early crypto adopters, hit an all-time high of US$0.5922. It was last up 36% at US$0.5549, according to CoinGecko.com.
Currency bid prices at 3:35PM (1935 GMT) Description
U.S. Close Pct Change
+109.4800 +109.0450 Euro/Yen
+131.6300 +131.1600 Dollar/Swiss
+0.9115 Sterling/Dollar GBP=D3
+$1.3840 Dollar/Canadian CAD=D3
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates
https://tmsnrt.rs/2RBWI5E USD positions
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