* Short dollar positions prompt rebound; rally unlikely
* Sterling slumps; weak data casts doubt on rate hikes
(Recats, adds comment, updates prices, changes byline)
NEW YORK, May 3 (Reuters) - The dollar on Tuesday rebounded from a three-year low as investors booked profits after four weeks of steady selling, but traders said the respite was likely to be brief because of an extended run of low U.S. interest rates.
The Australian dollar moved further away from a post-float high above $1.10 and sterling fell after weak factory data cast doubt on when the Bank of England would lift interest rates.
The European Central Bank raised rates last month for the first time since 2008 and is expected to do so again this year, though traders expect it to stand pat when it meets this week.
Traders said these developments coupled with the speed of the dollar's decline -- it has lost almost 8 percent against major currencies this year, losing nearly 4 percent in April -- prompted investors to unwind some bets against the currency.
"The market is exceptionally short and the dollar's move lower over the past few weeks has been so exceptionally quick that it simply couldn't continue like that," said David Watt, senior currency strategist at RBC Capital Markets.
The dollar was up 0.2 percent at 73.100 against a basket of major currencies .DXY after falling to a three-year low of 72.722 on Monday. It hit a record low of 70.698 in 2008.
Some analysts have tied the retreat of higher-yield currencies and assets such as oil and other commodities to fears of reprisal after U.S. special forces killed Osama bin Laden, but Watt said that sounded like "an excuse to take profits."
The dollar hit a record low at 0.8615 Swiss francs CHF= and shed 0.6 percent to trade at 80.71 yen JPY=. The Swiss and Japanese currencies often rise when risk appetite fades.
But the dollar hardly looks ready to stage a sustained rally, analysts said, particularly with the U.S. central bank hinting that interest rates will remain at zero for some time and with markets fretting about the U.S. ability to get a yawning federal budget deficit under control.
Emerging market currencies, which unlike some majors are far from overvalued against the dollar, will also continue to appreciate, which will keep the dollar under pressure.
"The backdrop hasn't changed, and there's really no trigger for a sustained (dollar) rally," Watt said.
After falling as low as $1.4751 overnight, the euro was last at $1.4820 EUR=, unchanged on the day and within striking distance of Monday's 17-month high above $1.49.
BNP Paribas strategists said the euro could retreat below $1.47, at which point traders "may well be able to look for even better levels to re-set dollar shorts" ahead of Thursday's ECB policy meeting and Friday's U.S. employment data.
Hawkish comments about inflation from the ECB and any sign of slower U.S. job growth on Friday could reignite dollar selling, they said.
"It's very much a case of buying the dips in euro/dollar at these levels. Rate hike expectations are anchoring the euro," said Chris Walker, currency strategist at UBS in London.
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Sterling fell to its lowest level since March 2010 against the euro at 89.80 pence EURGBP=D4 after a survey of UK manufacturing came in below market expectations. The pound also fell 0.9 percent to $1.6493. [ID:SLATFE7TP]
The Australian dollar fell 0.6 percent at $1.0878 AUD=D4 after the central bank kept rates at 4.75 percent as expected and sounded a bit less hawkish than expected. [ID:nL3E7G2094]
The Canadian dollar CAD= pared gains after a brief relief rally as Canada's ruling Conservatives won a crushing victory in the federal election. [ID:nN02265133]
(Additional reporting by Neal Armstrong in London; editing by Chizu Nomiyama)
* Dollar index up on day but in sight of 3-yr lows
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