By Karen Brettell

NEW YORK (Reuters) - The dollar weakened on Tuesday as investors evaluated the likelihood that the U.S. Federal Reserve will raise interest rates this year, with no major new economic indicators due until Friday's retail sales report.

The greenback had gained since last Friday's jobs report for July showed better-than-expected employment gains, raising expectations that a further rate increase this year is likely.

It gave back some of those gains on Tuesday on no obvious catalyst, with trading volumes expected to be relatively light this week with many traders and investors on summer vacations.


A speech by Fed Chair Janet Yellen at the central bank's Aug. 26 symposium in Jackson Hole, Wyoming will be closely watched for any new indications of when an interest rate increase is likely.

"I think the risks are tilted towards a less dovish sounding narrative from Chair Yellen," said Richard Franulovich, a senior currency strategist at Westpac Banking Corporation in New York.

"Financial conditions remain very buoyant post Brexit and the Fed will breathe a huge sigh of relief that we now have two back-to-back strong payrolls numbers," he said, referring to Britain's vote in June to leave the European Union.

The dollar index <.DXY> against a basket of currencies fell 0.24 percent to 96.174. The greenback was 0.53 percent weaker against the Japanese yen at 101.88. <JPY=>

The yen extended gains against the dollar on Tuesday after data showed that U.S. nonfarm productivity unexpectedly fell in the second quarter.

The British pound fell for the fifth day in a row on Tuesday after a Bank of England policymaker said that more quantitative easing was probably necessary if Britain's economic decline worsens.

"Bank rate can be cut further, closer to zero, and quantitative easing can be stepped up," Ian McCafferty, an external member of the Monetary Policy Committee, wrote in an op-ed piece for the Times.

The pound <GBP=> was last down 0.30 percent at $1.2999, after earlier dropping to $1.2957, its lowest since July 11.

The Bank of England last week cut interest rates to next to nothing and unleashed billions of pounds of stimulus to cushion the economic shock from Britain's vote to leave the EU.

The Reserve Bank of New Zealand is expected to be the next central bank to ease conditions, by cutting rates on Thursday by 25 basis points to 2.00 percent.

The kiwi gained 0.10 percent against the U.S. dollar to $0.7143.

(Editing by Lisa Von Ahn and Will Dunham)