TOKYO  - The dollar largely kept to familiar trading ranges on Wednesday, as it found support near a 3-1/2-week high on higher U.S. yields after the United States eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies.

The move came as a relief to markets hit by escalating trade tensions between the United States and China, though analysts said sentiment remained fragile with tariff negotiations between the world's two largest economies yet to produce a durable solution.

"The trade dispute won't be resolved easily, so the risk-off mood won't come off all of a sudden, said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank. "I think market sentiment will rather improve one small step at a time."

Against a basket of key rival currencies, the dollar was largely steady at 98.031, having brushed a 3-1/2-week high of 98.134 overnight. The index has risen 1.9% this year.

The U.S. Commerce Department blocked Huawei Technologies Co Ltd from buying U.S. goods last week, leading several companies to suspend business with the world's largest telecoms equipment maker.

Chipmakers, many of which sell to Huawei, bore the brunt of the sell-off. But late on Monday, the United States granted Huawei a licence to buy U.S. goods until Aug. 19.

Against the yen, the dollar was largely steady at 110.49 yen, after hitting a two-week high of 110.675 during the previous session. The greenback has recovered 1.4% from a three-month trough of 109.02 yen touched on May 13.

Japan's exports fell 2.4% in April from a year earlier, down for a fifth straight month, in a sign of weakness in external demand, finance ministry data showed. That was more than the 1.8% decrease expected by economists in a Reuters poll.

Sumitomo Mitsui's Sera said the yen's weakness overnight was thanks to higher U.S. Treasury yields, which ticked up in response to the recovery in U.S. equities.

"When yields are rising, it's natural for the dollar to be bought. I think moves in U.S. yields are really important," she said.

The 10-year U.S. Treasury note yield was up slightly at 2.428%. It had moved further off a seven-week low of 2.354% brushed on Thursday during the previous session.

MUFG Bank's chief currency strategist Minori Uchida said he expected demand for the U.S. currency to remain strong on a need for dollar funding among emerging markets and on investor cautiousness due to the Sino-U.S. trade dispute.

"Even if yields fall, that's not likely to put a big dent in the dollar's rise," he said.

The Australian dollar edged down to $0.6881, drifting back toward its recent low of $0.6865 as investors piled into wagers for two cuts in interest rates by the country's central bank this year.

Elsewhere in the foreign exchange market, the euro was steady at $1.1162.

The single currency, which has given up 0.9% from this month's high touched on May 1, has been under pressure in recent weeks on dollar strength and due to concerns the coming European parliamentary elections may see euroskeptic parties faring well.

The pound was at $1.2715, hovering near a four-month low of $1.2685 touched overnight.

Sterling briefly rose overnight after Prime Minister Theresa May set out a "new deal" for Britain's departure from the EU, offering sweeteners to Parliament including the chance to vote on whether to hold a second referendum to try to break the impasse over Brexit.

Yet traders doubted that a fractious parliament would back a second referendum.

(Editing by Shri Navaratnam and Richard Borsuk) ((daniel.leussink@thomsonreuters.com; Twitter: @danielleussink; +81-3-6441-1825; Reuters Messaging: daniel.leussink.thomsonreuters.com@reuters.net))