July 23, 2018 / 7:54 PM / 7 months ago

FOREX-Dollar grinds upward on higher Treasury yields

    * U.S. Treasury yields hit five-week highs
    * Trump's dollar comments rein in dollar bulls
    * Japanese yen stronger as government yields spike 

 (Recasts with performance of U.S. dollar; changes byline)
    By James Thorne
    NEW YORK, July 23 (Reuters) - The U.S. dollar marched steadily higher on
Monday, helped by a rise in Treasury yields on expectations that the Federal
Reserve would continue raising interest rates despite criticism from President
Donald Trump.
    The relatively small gains in the dollar compared with jumps in longer-dated
Treasury yields reflected currency traders' concerns over Trump's comments late
last week that bemoaned the effects a strong currency.
    "Trump took the wind from the dollar bull sails, and they haven't really been
able to replace it," said Marc Chandler, chief global currency strategist at Brown
Brothers Harriman & Co in New York.
    CNBC reported late last week that Trump was worried the Federal Reserve will
raise interest rates twice more this year. Trump said the Fed's policy tightening
and the strong dollar could hurt the U.S. economy.
    The disparity in interest rates between the U.S. and other major economies has
been a primary driver of the stronger dollar this year.
    The dollar index, a measure of the currency against a basket of six
rivals, was up 0.22 percent. 
    The greenback rose against the euro to $1.169, a gain of 0.24 percent.

    The yen strengthened on Monday following a Reuters report that the Bank of
Japan was debating moves to scale back its massive monetary stimulus, spurring bids
for the Japanese currency.
    The yen's advance was modest, with the 10-year Japanese government bond yields
hitting a six-month high, as traders wanted to see concrete measures from the BOJ.
    "The market may be too complacent that the BOJ would be in this easy policy
mode forever," said Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington. "We have to wait and see what happens."
    The BOJ, facing stubbornly low inflation, is in unusually active discussions,
with changes to its interest-rate targets and stock-buying program on the table,
people familiar with the central bank's thinking told Reuters.
    The yen reached a two-week peak at 110.74 yen per dollar before retreating to
111.41 yen, little changed from Friday, Reuters data showed.
    It strengthened to a two-week high at 129.87 yen per euro before retreating to
130.27 yen, up 0.26 percent on the day. 
    Also underpinning support for the yen were Trump's comments in a late-night
Twitter message warning Iran from making more threats against the United States.

    The Japanese currency is seen as a safe-haven due to political worries.

    Currency bid prices at 1525 EDT (1925 GMT):
 Description    RIC        Last      U.S.      Pct     YTD     High Bid   Low Bid
                                     Close     Change  Pct                
                                     Previous          Change             
 Euro/Dollar               $1.1692   $1.1718   -0.22   -2.53   +1.1750    +1.1683
 Dollar/Yen                111.4100  111.3900  +0.02   -1.12   +111.5400  +110.7600
 Euro/Yen                  130.27    130.61    -0.26   -3.63   +130.7300  +129.8700
 Dollar/Swiss              0.9927    0.9924    +0.03   +1.89   +0.9941    +0.9902
 Sterling/Doll             1.3099    1.3132    -0.25   -3.06   +1.3158    +1.3084
 Dollar/Canadi             1.3171    1.3147    +0.18   +4.72   +1.3179    +1.3116
 Australian/Do             0.7377    0.7421    -0.59   -5.44   +0.7437    +0.7372
 Euro/Swiss                1.1607    1.1632    -0.21   -0.70   +1.1644    +1.1604
 Euro/Sterling             0.8922    0.8924    -0.02   +0.44   +0.8939    +0.8911
 NZ                        0.6781    0.6807    -0.38   -4.30   +0.6824    +0.6777
 Dollar/Norway             8.1943    8.1778    +0.20   -0.15   +8.2036    +8.1481
 Euro/Norway               9.5820    9.5858    -0.04   -2.71   +9.5930    +9.5403
 Dollar/Sweden             8.8641    8.8531    -0.10   +8.08   +8.8722    +8.8269
 Euro/Sweden               10.3640   10.3740   -0.10   +5.33   +10.3983   +10.3400
 (Reporting by James Thorne; additional reporting by Richard Leong in New York;
Editing by Lisa Shumaker)
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