FOREX-Dollar up on yields; euro slips on Irish downgrade

Dollar supported by higher Treasury yields, U.S. tax cuts

* Euro slips after Fitch downgrades Ireland

* Market awaits 30-yr U.S. debt auction, U.S. jobless claims

(Adds comment, updates throughout)

By Naomi Tajitsu

LONDON, Dec 9 (Reuters) - The dollar edged up on Thursday, still supported by a jump in U.S. Treasury yields this week, while the euro slipped after ratings agency Fitch downgraded Ireland's sovereign debt.

Fitch cut its rating on Ireland to BBB+ to reflect the additional costs of restructuring Dublin's ailing economy and banking sector, after Dublin secured a bailout from its European neighbours last month. [ID:nWLA0394]

The dollar continued to draw support from an extension of U.S. tax cuts announced this week, but further gains were capped as a retreat in the benchmark 10-year U.S. Treasury yield from a six-month high hit on Wednesday quelled demand for the dollar.

Analysts said the extended tax cuts were seen as supportive for the economy and therefore the dollar, while U.S. Treasuries have sold off heavily this week, as the stimulative move fuelled fears of inflation and deteriorating U.S. fiscal health. [US/]

"The latest fixation is the tax issue and that's created a bond angle, and it's created a growth story that is positive for the U.S.," said Daragh Maher, FX strategist at Credit Agricole.

Other analysts said investors were wary of taking on big positions as liquidity dries up towards year end, and this was why the dollar's rise had been limited compared with the jump in Treasury yields.

The dollar index has risen only 0.7 percent this week as the 10-year U.S. Treasury yield has soared around 25 basis points.

"We've seen a corrective move in U.S. Treasuries, whereas at the moment, we don't see a need for such a corrective move in the dollar," said Antje Praefcke, FX analyst at Commerzbank in Frankfurt.

The U.S. bond market may be vulnerable to more selling if a 30-year U.S. Treasury auction on Thursday attracts only limited demand. A 10-year auction on Wednesday saw average demand.

The dollar index .DXY, which tracks the dollar's moves against a currency basket, inched up 0.2 percent to 80.172. It crept above its 100-day moving average at 79.953, which seen as supportive for the U.S. currency.