FOREX-Dollar rallies as U.S. economic optimism boosts Treasury yields

    * Dollar index hits four-month high
    * Dollar/yen climbs to one-year peak
    * Graphic: World FX rates

 (Adds new comment, updates prices, changes byline, dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 30 (Reuters) - The dollar rose against major currencies on Tuesday and climbed to a
one-year high against the yen as increasing U.S. vaccinations and plans for a major stimulus package stoked
inflation expectations and lifted U.S. Treasury yields.
    Benchmark 10-year Treasury yields rose to 14-month highs on Tuesday at 1.776%, and were last up 2 basis
points on the day at 1.742%.    
    Treasury yields are rising a day before President Joe Biden is set to outline how he intends to pay for
a $3 trillion to $4 trillion infrastructure plan.
    "The acceleration of the vaccine rollout and the size of the infrastructure plan are causing yields to
rise and the dollar is benefiting," said John Doyle, vice president of dealing and trading at Tempus Inc. in
    The safe-haven dollar found support across the board as investors also digested the fallout from the
collapse of highly leveraged investment fund Archegos Capital.
    The dollar index rose above the 93 mark and was last up 0.4%at 93.288. It hit a high of 93.357,
its highest level in four months. 
    The dollar also rose above 110 yen, a level not seen since March last year, and was last up 0.5% on the
day at 110.375 yen. The greenback was on track for its  best month since late 2016. 
    Analysts said the yen was also vulnerable to higher inflation expectations in the United States than in
Japan and a rise in long-term U.S. yields. The dollar/yen pair typically has a positive correlation with
long-term U.S. yields.
    The euro, meanwhile, weakened on the day to $1.1711, its lowest level since early November. It was last
down 0.3% to $1.1728.
    Tougher coronavirus curbs in France and Germany have dimmed the short-term outlook for the European
economy. A widening spread between U.S. and German bond yields is adding pressure on the euro.
    The spread between U.S. and German 10-year yields has widened the most since January of last year.
    Investors will watch closely the monthly U.S. non-farm payrolls on Friday, with Federal Reserve
policymakers so far citing slack in the labor market for their continued lower-for-longer stance on interest
    "In a week when the market is feeling so optimistic about the forthcoming payrolls release, it seems
very likely that the greenback will find strong support," Rabobank currency strategist Jane Foley wrote in a
    However, "the market is in danger of pricing in too much inflation risk," meaning "we see scope for the
USD to soften in the months ahead," the report said.
    Currency bid prices at 10:41AM (1441 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
 Dollar index                 93.2340        92.9030     +0.37%         3.615%        +93.3570    +92.8820
 Euro/Dollar                  $1.1727        $1.1767     -0.34%         -4.02%        +$1.1778    +$1.1711
 Dollar/Yen                   110.3300       109.8350    +0.46%         +6.79%        +110.4200   +109.7500
 Euro/Yen                     129.38         129.20      +0.14%         +1.94%        +129.5400   +129.1800
 Dollar/Swiss                 0.9432         0.9394      +0.41%         +6.61%        +0.9438     +0.9389
 Sterling/Dollar              $1.3727        $1.3760     -0.20%         +0.52%        +$1.3783    +$1.3707
 Dollar/Canadian              1.2625         1.2590      +0.29%         -0.84%        +1.2647     +1.2581
 Aussie/Dollar                $0.7616        $0.7632     -0.23%         -1.01%        +$0.7664    +$0.7601
 Euro/Swiss                   1.1058         1.1051      +0.06%         +2.32%        +1.1067     +1.1045
 Euro/Sterling                0.8541         0.8542      -0.01%         -4.43%        +0.8554     +0.8524
 NZ                           $0.6987        $0.7001     -0.19%         -2.69%        +$0.7033    +$0.6975
 Dollar/Norway                8.5500         8.5485      +0.01%         -0.44%        +8.5890     +8.5460
 Euro/Norway                  10.0292        10.0426     -0.13%         -4.18%        +10.0795    +10.0247
 Dollar/Sweden                8.7486         8.6906      +0.26%         +6.74%        +8.7638     +8.6832
 Euro/Sweden                  10.2597        10.2328     +0.26%         +1.82%        +10.2695    +10.2194
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Iain Withers in London; Editing by Larry
King and Dan Grebler)