October 9, 2018 / 7:20 PM / in 2 months

FOREX-Dollar index retreats from 7-week high, sterling rises

    * Longer-dated U.S. yields scale back from multi-year highs
    * Sterling bounces on DJ report of Brexit deal by Monday 
    * IMF cuts world growth forecasts on tariffs, EM strain
    * Yuan stabilizes near seven-week lows amid liquidity
squeeze
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Oct 9 (Reuters) - The dollar dipped on Tuesday due
to a fall in U.S. bond yields after touching a seven-week peak
against a basket of currencies, as sterling rose following a
report that rekindled hopes that Britain and the European Union
are on the brink of a Brexit deal.
    Investors dumped U.S. bonds last week on fears that domestic
inflation might accelerate, prompting the Federal Reserve to
hasten the pace of interest rate hikes.
    On Tuesday, the benchmark 10-year Treasury yield
climbed to a seven-year high at 3.261 percent before receding to
 3.2101 percent on weaker equity prices and worries about global
growth.
    An index that tracks the dollar versus six major currencies
 was down 0.11 percent at 95.651 after hitting a
seven-week peak at 96.155.
    The euro was helped by a Dow Jones report that an agreement
on the terms for Britain to leave the economic bloc may be
reached as soon as Monday. The single currency had weakened
earlier on worries about the tension between the EU and Italy
over that country's budget.
    "That flipped everything around. It salvages the open wounds
from the Italian budget negotiations," said Boris Schlossberg,
managing director of FX strategy at BK Asset Management in New
York said of the Dow Jones report on a Brexit deal by Monday.
    Dow Jones, citing unidentified diplomats, said both parties
had narrowed their differences around the Irish border but some
issues have not been solved. 
    Sterling reversed its earlier drop to rise to 
$1.3147, up 0.41 percent. Against the euro, it was up 0.36
percent at 87.45 pence per euro.
    Earlier, Italian Economy Minister Giovanni Tria struck a
resolute tone on his controversial budget plans in Rome's
parliament. Italy's benchmark 10-year government bond yield rose
toward a 4-1/2-year high.
    The euro fell to a seven-week low of $1.14325. It
was last at $1.15000, up 0.08 percent. The single currency
 was down 0.1 percent at 129.980 yen.
    YUAN STEADIES 
    The Chinese yuan steadied near a seven-week low against the
greenback as a liquidity squeeze in the offshore yuan market in
Hong Kong helped stabilize sentiment.
    The Chinese offshore yuan fell to 6.9350 yuan per
dollar before retracing to 6.9158, which was little changed on
the day.
    At the weekend, China's central bank cut requirements on
bank reserves in a bid to add more liquidity into its banking 
system as policy-makers worried about the economic impact of a
heated trade row with the United States.
    Sparring between Washington and Beijing on trade and Italy's
proposed hefty debt target have stoked worries about slowing
global growth, feeding safe-haven demand for the dollar.
    The International Monetary Fund on Tuesday reduced its
global growth forecasts for 2018 and 2019 to 3.7 percent from
3.9 percent for both years.
========================================================
    Currency bid prices at 2:53PM (1853 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1497        $1.1490     +0.06%         -4.16%      +1.1503     +1.1432
 Dollar/Yen       JPY=        113.0100       113.2300    -0.19%         +0.30%      +113.3900   +112.9400
 Euro/Yen         EURJPY=     129.96         130.10      -0.11%         -3.86%      +130.2300   +129.3500
 Dollar/Swiss     CHF=        0.9920         0.9925      -0.05%         +1.82%      +0.9955     +0.9921
 Sterling/Dollar  GBP=        1.3146         1.3088      +0.44%         -2.71%      +1.3150     +1.3034
 Dollar/Canadian  CAD=        1.2940         1.2963      -0.18%         +2.89%      +1.3003     +1.2936
 Australian/Doll  AUD=        0.7102         0.7076      +0.37%         -8.96%      +0.7103     +0.7055
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1408         1.1404      +0.04%         -2.40%      +1.1415     +1.1370
 Euro/Sterling    EURGBP=     0.8744         0.8775      -0.35%         -1.56%      +0.8791     +0.8734
 NZ Dollar/Dolar  NZD=        0.6468         0.6446      +0.34%         -8.72%      +0.6470     +0.6428
 Dollar/Norway    NOK=        8.2647         8.2757      -0.13%         +0.70%      +8.3072     +8.2508
 Euro/Norway      EURNOK=     9.5027         9.5103      -0.08%         -3.51%      +9.5170     +9.4822
 Dollar/Sweden    SEK=        9.0976         9.0848      +0.20%         +10.92%     +9.1451     +9.0712
 Euro/Sweden      EURSEK=     10.4620        10.4406     +0.20%         +6.33%      +10.4821    +10.4223
    

    
 (Additional reporting by Tom Finn in London
Daniel Leussink in Tokyo
Editing by David Gregorio and Chizu Nomiyama)
  
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