* Dollar bolstered as U.S. Treasury yields rise
* Dollar index rises above 80 .DXY, breaches 100-day MA
* Also rises 0.4 pct to 83.89 yen JPY=
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By Tamawa Desai
LONDON, Dec 8 (Reuters) - The dollar rose on Wednesday and looked to sustain gains in the near-term on a spike in U.S. Treasury yields as a proposed extension of tax cuts raised growth expectations for the U.S. economy.
Traders took their cue from a rise in the 10-year U.S. Treasury yield to 3.25 percent US10YT=RR, a level not seen since late June and beyond Tuesday's high of 3.18 percent. [US/]
The rise in yields was seen as dollar supportive near-term, despite the adverse fiscal impact of the U.S. government's tax plan.
U.S. yields would likely provide short-term direction, and markets would keep a close eye on a 10-year U.S. bond auction later in the day and a 30-year auction on Thursday.
"Treasuries may extend their yield rises a bit further so the dollar may have a bit more to go but not much," said Adrian Schmidt, currency strategist at Lloyds Banking Group, adding he does not see the euro breaking below $1.30.
The dollar index =USD.DXY, a gauge of its performance against a basket of major currencies, rose 0.3 percent from late U.S. levels to 80.138, moving above its 100-day moving average at 79.981. If sustained that would be a bullish signal.
The greenback, which made its biggest one-day gain against the yen in nearly three months on Tuesday, rose a further 0.4 percent to 83.89 yen JPY=. It briefly rose above 84 yen, where there is a resistance band through 84.40 that has capped its recent rally.
The euro fell 0.1 percent $1.3244 EUR=. Its failure this week and last to hold above $1.3400 suggests a probe lower, with a sustained break of $1.3180 opening the way for a test of $1.3060/50.
Bids from Asian central banks and Middle East accounts were seen around $1.3200 and $1.3180, respectively, traders said.
Ireland moved a step closer to securing bailout funds after passing the first in a series of votes on its toughest budget on record, but traders said investors were still likely to sell the euro on any bounce given broader worries about the European Union's ability to keep debt problems from spreading.
Markets concerns over North Korea firing artillery shells in a suspected military drill were also helping the dollar [ID:nN08113240]
For analysis on US tax deal [ID:nN07277043]
Full coverage of tax and deficit debates [ID:nN06200548]
Reuters Breakingviews column [ID:nN07158253]
Graphic: Tax proposal: record deficit, more growth
Analysts said the dollar's outlook appeared well-supported in the near term.
"The market seems happy for now to follow U.S. yields which have boosted the dollar," said Geoffrey Yu, currency strategist at UBS in London.
The yield jump made the dollar more attractive to those chasing higher yields and cuts the yield advantage of currencies such as the Australian dollar. The Australia/U.S. 10-year yield spread narrowed to about 240 basis points, well off a November high of 275.
The Australian dollar fell 0.3 percent to $0.9808 AUD=D4, backing off parity with the greenback hit in November.
Other risk-related currencies were mixed, with the New Zealand dollar down 0.8 percent NZD=D4 while the Canadian dollar was little changed against the greenback CAD=. (Editing by Patrick Graham)