April 20, 2018 / 7:22 PM / a year ago

FOREX-Dollar hits 2-week peak on higher U.S. yields; sterling sags

    * U.S. 2-year yield touches highest since Sept 2008
    * Euro hits 2-week lows amid worries about region's growth
    * Sterling on track for steepest weekly drop in 10 weeks
    * Commodity-sensitive currencies broadly lower

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, April 20 (Reuters) - The U.S. dollar rose to a
two-week high against a basket of currencies on Friday on rising
U.S. yields, while sterling extended a decline in the wake of
dovish comments from the head of the Bank of England. 
    The euro fell to a two-week low versus the dollar, for its
biggest weekly drop in two months, as investors trimmed record
high bets before a European Central Bank meeting next week where
policymakers are largely expected to signal no change in policy.
    Commodity-linked currencies came under pressure thanks to a
drop in Chinese stocks, with the Australian and New Zealand
dollars hitting their lowest levels in at
least two weeks.
    "Higher U.S. yields have contributed to the rise in the
dollar," said Chuck Tomes, senior investment analyst at Manulife
Asset Management in Boston.
    U.S. two-year Treasury yields reached 2.453
percent on Friday, the highest level since September 2008 as the
two-year's spread versus two-year German Bunds grew
to 302 basis points, the widest in more than three decades.
    This week, Federal Reserve officials signaled further
interest rate increases in 2018 based on evidence of steady U.S.
growth, while the heads of the ECB and the Bank of England
seemed in no rush to push rates higher in the wake of
disappointing economic data out of Britain and Europe.
    Still, the dollar's overall prospect remains cloudy due to
expectations of the United States' growing trade and budget
deficits, analysts said. 
    The dollar index, which tracks the greenback versus a basket
of six currencies, rose 0.4 percent, to 90.314, after
touching a near two-week high of 90.477.
    The greenback gained 0.2 percent against the yen, at
107.50 yen, after touching a two-month peak of 107.85 yen.
    The euro hit a two-week low of $1.2248, for a weekly
drop of 0.39 percent, its steepest weekly fall in two months.
    Expectations have grown that ECB policymakers may take
another small step in exiting the bank's ultra-easy monetary
policy after dropping a long-standing pledge to increase bond
buying if needed at its meeting in March.
    On Friday, ECB President Mario Draghi told central bankers
and ministers at an event in Washington that the 19-nation euro
zone has been expanding robustly and needs strong global growth
and open trade for the expansion to continue.
    But some analysts doubt the ECB would signal further changes
in policy next week.
    "The speed of euro zone activity has declined after the very
strong activity we had seen in 2017," said Ugo Lancioni, head of
currency management with Neuberger Berman in London. "The ECB
may be cautious."   
    Sterling shed 0.4 percent to $1.4032, leading to a
weekly loss of 1.4 percent, which would be its biggest in 10
    Sterling has fallen on weaker-than-expected inflation and
retail sales data and comments from BOE Governor Mark Carney on
Thursday, which traders interpreted as the BOE's being less
committed to raising rates in May due to recent "mixed" data.

    Currency bid prices at 2:58PM (1858 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2286        $1.2344     -0.47%         +2.42%      +1.2352     +1.2251
 Dollar/Yen       JPY=        107.5900       107.3600    +0.21%         -4.51%      +107.8500   +107.3600
 Euro/Yen         EURJPY=     132.18         132.53      -0.26%         -2.22%      +132.9600   +132.0500
 Dollar/Swiss     CHF=        0.9744         0.9713      +0.32%         +0.01%      +0.9759     +0.9707
 Sterling/Dollar  GBP=        1.4024         1.4090      -0.47%         +3.79%      +1.4091     +1.4008
 Dollar/Canadian  CAD=        1.2746         1.2669      +0.61%         +1.34%      +1.2749     +1.2633
 Australian/Doll  AUD=        0.7672         0.7728      -0.72%         -1.65%      +0.7731     +0.7656
 Euro/Swiss       EURCHF=     1.1974         1.1989      -0.13%         +2.44%      +1.2005     +1.1951
 Euro/Sterling    EURGBP=     0.8760         0.8763      -0.03%         -1.38%      +0.8790     +0.8735
 NZ Dollar/Dolar  NZD=        0.7204         0.7270      -0.91%         +1.67%      +0.7271     +0.7202
 Dollar/Norway    NOK=        7.8185         7.7906      +0.36%         -4.73%      +7.8460     +7.7868
 Euro/Norway      EURNOK=     9.6068         9.6195      -0.13%         -2.46%      +9.6305     +9.5997
 Dollar/Sweden    SEK=        8.4442         8.4032      +0.02%         +2.96%      +8.4647     +8.4041
 Euro/Sweden      EURSEK=     10.3760        10.3741     +0.02%         +5.46%      +10.3905    +10.3660

 (Additional reporting by Saikat Chatterjee in London and
Hideyuki Sano in Tokyo; Editing by Bernadette Baum and Leslie
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