By Kevin Buckland

TOKYO (Reuters) - U.S. long-term Treasury yields sank to a more than seven-week trough on Friday while the dollar dropped back toward recent lows against major peers as markets continued to digest dovish signals from the Federal Reserve.

Expectations of a less aggressive pace of U.S. monetary tightening from as soon as next month continued to support some stock markets in Asia, but Hong Kong's dropped as record COVID-19 infections in China dimmed the outlook.

The dipped to 3.65% in Tokyo trading, the lowest since Oct. 5, following Thursday's U.S. Thanksgiving holiday. The two-year yield slipped to a one-week bottom at 4.424%.

The , which measures the greenback against the euro, yen and four other rivals, retreated 0.11% to 105.76, heading back toward Thursday's low of 105.62.

A "substantial majority" of Fed policymakers had agreed it would "likely soon be appropriate" to slow the pace of interest rate rises, minutes of their latest meeting showed on Wednesday.

Futures markets show investors now see U.S. rates peaking just above 5% around May, and are pricing in roughly two-thirds odds that the Fed slows to a half-point hike on Dec. 14 from a string of 75-basis-point increases.

"More and more market participants are getting confident that the peak in long-term yields is past, and we are slowly moving toward a Fed pause," said Naka Matsuzawa, chief Japan macro strategist at Nomura in Tokyo.

U.S. E-mini futures pointed 0.25% higher for the restart of Wall Street trading on Friday.

Asia-Pacific share markets were mixed, with Australia's benchmark managing a 0.24% rise, but a sell-off in Hong Kong shares weighed on sentiment in other parts of the region.

The Hang Seng dropped 0.86%, led by a 2.29% tumble for the tech sector.

slumped 0.36% and South Korea's Kospi edged down 0.08%.

China on Friday reported another record-high of daily COVID infections, with cities nationwide imposing localised lockdowns, mass testing and other curbs, snuffing out recent hopes that the world's second-largest economy would move from strict zero-COVID policies to living with the disease.

"Investors are right to be worried," said ING economist Rob Carnell. "China doesn't have the adequate health network that they would be able to deal with a full-on outbreak with lots of people getting sick."

"Sort of medium-term living with COVID is a nice dream, but how do you get there?," Carnell added.

Mainland Chinese blue chips, though, rose 0.54%, buoyed by more government measures to support the slumping real estate market. An index of property developer shares surged 5.84%.

Oil prices rose in Asia in thin liquidity, paring some of their declines in a week marked by worries about Chinese demand and haggling over a Western price cap on Russian oil. [O/R]

futures rose by 28 cents, or 0.33%, to trade at $85.62 a barrel.

U.S. West Texas Intermediate (WTI) crude futures climbed 49 cents, or 0.49%, from Wednesday's close to $78.43 a barrel. There was no WTI settlement on Thursday due to the U.S. Thanksgiving holiday.

Both contracts were still headed for their third consecutive weekly decline, on track to fall about 2%.

Gold ticked 0.2% higher to about $1,758 an ounce amid the dollar's weakness.