* Dollar treads water vs euro, yen
* July 27-28 Fed meeting eyed for potential fresh lift for dollar
* Aussie struggles near 6-year lows
By Shinichi Saoshiro
TOKYO, July 27 (Reuters) - The dollar was subdued against the euro and yen on Monday after a drop in U.S. shares and bond yields dimmed its allure, with markets focused on whether the upcoming Federal Reserve policy meeting can lift the greenback.
The euro was little changed at $1.0972 EUR= , having gained about 1.4 percent last week.
The euro has lost as much as 5 percent against the dollar since mid-June on Greek debt worries and the divergence of U.S. and European monetary policies, but a technical correction to the dollar's rally gave the euro a breather last week.
The dollar faced a similar predicament against the yen, having surged to a six-week high of 124.48 JPY= early last week only to slide to as low as 123.62. It last stood steady at 123.78.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, reckoned the dollar looked vulnerable against the yen amid wariness towards verbal warnings against further yen depreciation by Japanese officials.
"The pullback in U.S. stocks and the decline in bond yields may encourage short-term traders to push the dollar lower. Still, ahead of the FOMC meeting support in 122.90-123.10 yen may limit the selling," he wrote.
The S&P 500 and Nasdaq posted their largest weekly drops since March on Friday, hit by downbeat corporate earnings and as slowing global growth dragged commodity-related stocks lower. Weaker equities in turn helped push U.S. Treasury yields further down.
The market will watch the July 28-29 Fed meeting to see if policymakers provide clues for the timing of a rate "lift-off." Steadily expanding expectations that the U.S. central bank could begin hiking interest rates as early as September has been a key factor behind the dollar's gains over the past month.
The Australian dollar struggled near six-year lows versus the dollar, faced with the prospect of its central bank taking the opposite step and easing further.
The recent decline in commodity prices has been unkind to the Aussie, with its decline accelerated late last week by weak factory data from China, Australia's main trading partner.
The Aussie AUD=D4 stood just above Friday's trough of $0.7260, its lowest since May 2009.
The New Zealand dollar NZD=D4 fared a little better, treading water at $0.6581 and maintaining some distance between the six-year low of $0.6498 struck mid-month. The kiwi was helped last week when the Reserve Bank of New Zealand eased its cash rate by less than some had anticipated. (Editing by Eric Meijer)