* Dollar firms against euro, yen on firmer U.S. Treasury yields
* ECB willing and able to act if needed at December review
* Dairy auction, data hits New Zealand dollar
By Patrick Graham
LONDON, Nov 4 (Reuters) - The dollar inched towards 2-1/2 month highs against a basket of currencies on Wednesday, buoyed by returning expectations of a rise in U.S. rates and better growth globally, which has prodded yields on U.S. government bonds higher this week.
The euro, a sufferer since the European Central Bank sent a strong message last month on the prospect of more cuts in interest rates and other monetary easing, slid another quarter of a percent after a speech by ECB chief Mario Draghi.
The Federal Reserve's delay on raising interest rates in September had many investors and analysts predicting it would hold fire long into next year. But a bundle of more hawkish signals two weeks ago has turned that on its head.
Major banks say the resulting surge against the euro EUR= and a handful of other currencies has drawn many investors back into last year's big consensus trade of a push by the dollar towards parity with the euro.
Societe Generale (PA:SOGN) strategist Kit Juckes pointed to Tuesday's more than half percent gain against the euro as evidence of gathering momentum behind the U.S. currency.
"A break of the $1.08-1.16 range wasn't threatened, so we shouldn't overstate the move's significance," he said. "(But) my impression is that it reflects a rapid build-up of euro shorts as the speculative community re-engages with a favoured trade."
The euro had dipped another 0.3 percent to $1.0929 EUR= by 0900 GMT. Against a basket of six major rivals, the dollar last stood at 97.447 .DXY , up about 0.3 percent and heading toward a 2-1/2-month high of 97.818 touched last week.
Against the yen, the dollar rose about 0.2 percent to 121.23 JPY= , pulling away from Tuesday's low of 120.60.
Asian shares surged after an overnight rally on Wall Street that pushed U.S. Treasury prices down. The benchmark 10-year note yield US10YT=RR stood at 2.2052 percent, just off a 1-1/2-month peak of 2.225 percent.
"Yields went up, which helped lift the dollar ahead of U.S. payrolls data later in the week," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.
Economists expect U.S. employers to have added 180,000 jobs last month according to a Reuters poll. The nonfarm numbers on Friday will be preceded by ADP numbers on Wednesday. Upbeat reports would add to bets on a December move by the Fed.
Chinese and European surveys also helped sentiment. Activity in China's services sector expanded at its fastest pace in three months in October thanks to stronger new business. European purchasing manager indices were mixed compared to expectations but all pointed to growth.
Meanwhile, a further decline in dairy prices and soft New Zealand jobs data battered its dollar currency.
Against the U.S. dollar, the kiwi slid about 0.4 percent to $0.6636 NZD=D4 , peeling back from highs near 68 U.S. cents set in the past three sessions.