Dollar hits 4-month high vs yen as U.S. Treasury yields rise

* Euro struggles near $1.18 mark
* Dollar rise leaves yen at weakest since January
* Graphic: World FX rates in 2018

(Updates prices in text, table, adds analyst comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 17 (Reuters) - The dollar climbed to a
four-month peak against the yen on Thursday, bolstered by the
rise in U.S. Treasury yields that suggests a more upbeat outlook
for the world's largest economy.
U.S. benchmark 10-year yields hit a high of
3.122 percent on Thursday, the highest in nearly seven years.
Since the beginning of the year, U.S. 10-year yields have
increased by more than 50 basis points, on track for their
largest rise in eight years.
"The upside pressure on the dollar has been dramatic as the
dollar has not declined consistently in a period which should be
seeing dollar weakness," John Taylor, president and founder of
research firm Taylor Global Vision in New York, said.
Rising yields reflect continued optimism about the U.S.
economy, reinforcing expectations that the Federal Reserve would
raise borrowing rates at least two more times this year.
The dollar rose to its strongest level versus the Japanese
yen since Jan. 23 at 110.80 yen. It was last at 110.74, up 0.3
percent on the day.
The dollar index rose 0.1 percent to 93.462, below
its 2018 high of 93.632.
The euro, meanwhile, fell to nearly a five-month low against
the dollar on concerns about the demands of populist parties
likely to form Italy's next government.
Italy's anti-establishment 5-Star Movement and the
anti-immigrant League, which are working to draft a coalition
program, may ask the European Central Bank to forgive 250
billion euros of debt.
But broader Italian markets held up better on Thursday as
investors played down the broader impact on euro zone political
stability and questioned whether the Italian parties would
really follow through on such plans.
The euro slipped to $1.1798, just above the $1.1763
2018 low it hit on Wednesday.
The euro has slumped six cents from more than $1.24 in
three weeks after a huge dollar rally. Investors are betting
U.S. interest rates will need to rise further, while other
central banks are postponing monetary tightening.
That has forced investors who took big positions against the
dollar anticipating a fall in 2018 to unwind and cover their
positions, pushing the greenback even higher.
"This sense of a market that is not particularly well
prepared for a euro decline is supported by the benign
valuations still evident in the pricing of six-month and
12-month implied volatility," BNY Mellon analysts said in a
note, referring to prices of a measure of expected swings in the
value of the euro.
Sterling gave up earlier gains after the British government
dismissed a media report that Britain wanted to stay in the
European Union's customs union after Brexit.

Currency bid prices at 3:16PM (1916 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Euro/Dollar EUR= $1.1796 $1.1807 -0.09% -1.67% +1.1837 +1.1777
Dollar/Yen JPY= 110.7700 110.3800 +0.35% -1.69% +110.8500 +110.0900
Euro/Yen EURJPY= 130.68 130.35 +0.25% -3.33% +130.8400 +130.2500
Dollar/Swiss CHF= 1.0009 1.0010 -0.01% +2.73% +1.0033 +0.9988
Sterling/Dollar GBP= 1.3507 1.3485 +0.16% -0.04% +1.3569 +1.3475
Dollar/Canadian CAD= 1.2801 1.2784 +0.13% +1.78% +1.2822 +1.2749
Australian/Doll AUD= 0.7508 0.7514 -0.08% -3.76% +0.7547 +0.7498
Euro/Swiss EURCHF= 1.1811 1.1819 -0.07% +1.04% +1.1842 +1.1802
Euro/Sterling EURGBP= 0.8732 0.8753 -0.24% -1.70% +0.8760 +0.8714
NZ NZD= 0.6871 0.6895 -0.35% -3.03% +0.6936 +0.6873
Dollar/Norway NOK= 8.1221 8.0769 +0.56% -1.03% +8.1298 +8.0580
Euro/Norway EURNOK= 9.5824 9.5387 +0.46% -2.70% +9.5895 +9.5332
Dollar/Sweden SEK= 8.7416 8.7034 +0.33% +6.58% +8.7546 +8.6801
Euro/Sweden EURSEK= 10.3119 10.2779 +0.33% +4.81% +10.3193 +10.2630

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Tommy Wilkes in London
Editing by Susan Thomas)

First Published: 2018-05-17 02:47:44
Updated 2018-05-17 21:30:07

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