April 19, 2018 / 2:40 PM / a year ago

FOREX-Dollar index steady, supported by higher U.S. yields

    * U.S. 2-year yield climbs to highest level since Sept 2008
    * Euro stalls as traders worry about euro zone growth 

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, April 19 (Reuters) - The dollar was little changed
against a basket of currencies on Thursday as higher U.S. bond
yields and expectations of more rate increases from the Federal
Reserve offset worries about a trade war and a ballooning U.S.
budget deficit.
    Recent economic data suggested business activities overseas
may have peaked. This has reduced the appeal of the euro, yen
and other currencies which have strengthened against the dollar
since 2017 based on the view economies outside the United States
had been faring better until recent weeks.
    "It's a dull day altogether," said Minh Trang, senior
foreign exchange trader at Silicon Valley Bank in Santa Clara,
California. "We are seeing rangebound trading with most
currencies against dollar."
    An index that tracks the greenback versus the euro, yen,
sterling and three other currencies was down 0.02
percent, at 89.608. The dollar index has moved in a narrow 0.6
percentage point range since last Friday.
    The euro was last up 0.02 percent, at $1.2374, while
the dollar was 0.10 percent higher at 107.34 yen.
    The U.S. economy, while not firing on all cylinders, has
remained on a steady growth path which has assured the Federal
Reserve to stick with its current pace of rate increases.
    This has propelled the two-year Treasury yield to
2.436 percent, its highest level since September 2008. Its yield
gap over two-year German Bunds has reached its
widest level in over three decades. The hefty 3 percentage point
yield premium has supported some overseas demand for the dollar,
analysts said.
    On the other hand, the dollar faces headwinds from the 
uncertainty stemming from U.S. President Donald Trump's trade
and economic policies, as well as political events in the Middle
East and elsewhere.
    "There is a little bit of fatigue with the trade war issue
and the global economic cycle is losing momentum, especially in
the euro zone whereas the U.S. is holding up," said Christin
Tuxen, an FX strategist at Danske Bank in Copenhagen.
    Investors are growing nervous that the euro zone economy's
rebound is nearing the top and the European Central Bank may
move more slowly to tighten monetary policy.      
    Tuxen remains bullish on the euro, seeing the single
currency rise towards $1.30 in 12 months but said in the
short-term the euro could fall as the ECB, which meets next
week, takes more time in raising rates.
    Currency bid prices at 10:25AM (1425 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2375        $1.2372     +0.02%         +3.16%      +1.2400     +1.2356
 Dollar/Yen       JPY=        107.3400       107.2300    +0.10%         -4.73%      +107.5100   +107.1900
 Euro/Yen         EURJPY=     132.86         132.68      +0.14%         -1.72%      +133.0700   +132.6900
 Dollar/Swiss     CHF=        0.9672         0.9685      -0.13%         -0.73%      +0.9711     +0.9668
 Sterling/Dollar  GBP=        1.4229         1.4201      +0.20%         +5.31%      +1.4245     +1.4162
 Dollar/Canadian  CAD=        1.2605         1.2626      -0.17%         +0.22%      +1.2645     +1.2585
 Australian/Doll  AUD=        0.7781         0.7782      -0.01%         -0.26%      +0.7812     +0.7764
 Euro/Swiss       EURCHF=     1.1973         1.1985      -0.10%         +2.43%      +1.1998     +1.1963
 Euro/Sterling    EURGBP=     0.8697         0.8712      -0.17%         -2.09%      +0.8736     +0.8689
 NZ Dollar/Dolar  NZD=        0.7301         0.7317      -0.22%         +3.03%      +0.7342     +0.7294
 Dollar/Norway    NOK=        7.7481         7.7601      -0.15%         -5.59%      +7.7725     +7.7340
 Euro/Norway      EURNOK=     9.5907         9.6008      -0.11%         -2.62%      +9.6175     +9.5718
 Dollar/Sweden    SEK=        8.3824         8.4027      -0.25%         +2.20%      +8.4080     +8.3712
 Euro/Sweden      EURSEK=     10.3734        10.3989     -0.25%         +5.43%      +10.4051    +10.3593

 (Additional reporting by Tommy Wilkes in LONDON, Shinichi
Saoshiro in TOKYO; 
Editing by Hugh Lawson, Jon Boyle and Susan Thomas)
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