Updates headline and prices throughout, adds analyst comment

By Chibuike Oguh

NEW YORK, May 26 (Reuters) - The dollar firmed on Tuesday as renewed U.S. strikes on Iran dented optimism for a near-term ceasefire, boosting demand for the greenback as investors turned cautious.

Iran said the U.S. had violated a ceasefire after it conducted what it called defensive strikes in southern Iran, while U.S. Secretary of State Marco Rubio said that negotiating a deal to halt the conflict could "take a few days."

Hopes for a peace deal had earlier pushed oil prices below $100 a barrel and eased demand for the greenback.

But demand for the dollar has picked up slightly as investors grow less confident about a swift end to the conflict, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

"It's pretty straightforward what happened: we go home over the weekend, thinking we're close to a ceasefire and now there are new hostilities. So I think the market is waiting for developments," Chandler said.

The euro EUR= was down 0.15% against the dollar at $1.16265. The dollar strengthened 0.29% to 0.785 against the Swiss franc CHF=.

The dollar index =USD was up slightly 0.135% at 99.15 after falling 0.3% the previous day.

Oil prices clawed back some of their losses at the start of trading on Tuesday on news of the U.S. strikes. Brent crude futures LCOc1 rose 3.89% to $98.87 a barrel after dropping 7% on Monday. O/R

Data showed that U.S. consumer confidence eased in May as worries about inflation linked to the war with Iran intensified, offsetting an improvement in households' perceptions of the labor market.

"If you look at the rally in the stock market, which is a bit of catch up from yesterday, and oil prices - I'd say the market is a bit nervous. I think that's really the story. The economic data doesn't mean so much right now," Chandler added.

The British pound GBP=D3 fell 0.3% to $1.3465.

YEN WEAKENS

The shift in sentiment weighed on the Japanese yen, pushing it closer to the 160-per-dollar level that traders see as a potential trigger for intervention by Tokyo.

The Japanese yen JPY= weakened 0.2% against the greenback to 159.24 per dollar.

Treasury yields fell sharply on Tuesday as U.S. markets returned from a holiday, catching up on a drop in global bond yields on expectations of a peace deal. US/

The yield on benchmark U.S. 10-year notes US10YT=RR fell 8 basis points to 4.493%.

The Australian dollar AUD=, often viewed as a proxy for risk, was 0.1% down at $0.71675.

The dollar CNH= strengthened 0.01% to 6.784 versus the offshore Chinese yuan.