April 23, 2018 / 7:15 PM / 10 months ago

FOREX-Dollar climbs as U.S. 10-year bond yield flirts with 3 percent

    * U.S. 10-year Treasury yield approaches 3 percent 
    * Dollar at 4-month high on bond yields, positive trade
    * Euro, down 0.7 percent, faces big week with ECB meeting
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Updates news, analyst quotes, prices and table)
    By Kate Duguid
    NEW YORK, April 23 (Reuters) - The U.S. dollar rallied to a
four-month high on Monday as the 10-year Treasury yield's climb
toward the psychologically important 3 percent level spurred
buying of the greenback, leaving the euro and yen lower.
    The 10-year yield hit its highest in over four years at
2.998 percent, driven by worries about the growing supply of
government debt and accelerating inflation as oil and commodity
prices climb. But although traders got close, the 3 percent
barrier continued to hold late into Monday's session.
    The strong dollar also reflected an improved outlook on
trade. U.S. Treasury Secretary Steven Mnuchin said on Saturday
he may travel to China, a move that could ease tensions between
the world's two largest economies.
    "The de-escalation of trade tensions favors the dollar in
the short run, particularly against the euro and yen," said Mark
McCormick, North American head of foreign exchange strategy at
TD Securities in Toronto, Canada.
    Rising U.S. bond yields have not always fed through to a
higher dollar in 2018 as U.S. political uncertainty and
geopolitical tensions have sometimes caused a breakdown between
interest rates and currency performance.
    But with the 10-year Treasury yield closing in
on 3 percent and the gap between U.S. and German government bond
rates at a 29-year high, the dollar was bought across the board.
    Against a basket of currencies the dollar index rose 0.7
percent to 90.960, its highest level since Jan. 18.
    The euro fell by 0.7 percent to a two-month low of $1.2200
, not helped by a survey showing business activity in
April stabilizing across the euro zone.
    The euro had enjoyed a strong rally until February before
finding itself stuck in a trading range with the dollar after
the European Central Bank cautioned investors expecting it to
raise rates sooner than expected. The ECB holds its monetary
policy meeting on Thursday.
    "I don’t think there’s going to be any change in policy this
week. I think the tone might be a little more dovish, especially
on the Euro. The last ECB minutes revealed a little bit more
concern on the currency side," said Sireen Harajli, currency
strategist at Mizuho in New York.  
    The rise in bond yields also weakened Asian emerging market
currencies versus the dollar, with the Chinese yuan and
Korean won down and the Indonesian rupiah hitting
a two-year low of 13,895 per dollar.
    The Australian dollar skidded to its weakest since Dec. 13,
falling to as low as $0.760, while sterling and
the New Zealand dollar also dropped.
    The yen slumped 1 percent to a session low of 108.73
yen per dollar, its weakest since Feb. 13.
    Currency bid prices at 2:48PM (1848 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2211        $1.2286     -0.61%         +1.79%      +1.2290     +1.2203
 Dollar/Yen       JPY=        108.5900       107.6500    +0.87%         -3.62%      +108.7300   +107.6500
 Euro/Yen         EURJPY=     132.60         132.25      +0.26%         -1.91%      +132.7800   +132.1100
 Dollar/Swiss     CHF=        0.9777         0.9744      +0.34%         +0.35%      +0.9787     +0.9746
 Sterling/Dollar  GBP=        1.3938         1.4003      -0.46%         +3.15%      +1.4031     +1.3927
 Dollar/Canadian  CAD=        1.2844         1.2757      +0.68%         +2.12%      +1.2856     +1.2750
 Australian/Doll  AUD=        0.7604         0.7672      -0.89%         -2.53%      +0.7682     +0.7605
 Euro/Swiss       EURCHF=     1.1942         1.1976      -0.28%         +2.16%      +1.1984     +1.1927
 Euro/Sterling    EURGBP=     0.8759         0.8775      -0.18%         -1.40%      +0.8776     +0.8745
 NZ Dollar/Dolar  NZD=        0.7153         0.7207      -0.75%         +0.95%      +0.7221     +0.7152
 Dollar/Norway    NOK=        7.8885         7.8207      +0.87%         -3.88%      +7.8965     +7.8245
 Euro/Norway      EURNOK=     9.6336         9.6128      +0.22%         -2.18%      +9.6388     +9.6097
 Dollar/Sweden    SEK=        8.5132         8.4446      +0.16%         +3.80%      +8.5180     +8.4486
 Euro/Sweden      EURSEK=     10.3968        10.3800     +0.16%         +5.67%      +10.3995    +10.3710

 (Reporting by Kate Duguid and Tommy Wilkes; Editing by David
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