FOREX-Dollar holds near 2-week high on strong U.S. data, higher Treasury yields

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Dollar index hovers near 2-week high
* Strong U.S. housing, employment-related data supports
greenback
* US terminates Turkey's preferential trade deal, lira edges
down

(Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, May 17 (Reuters) - The dollar held near a two-week
high against its peers on Friday, supported by strong U.S.
economic data and a bounce in Treasury yields.
The dollar index versus a basket of six major currencies
.DXY stood at 97.836 after reaching 97.882 on Thursday, its
highest since May 3.
The greenback reached the two-week peak on robust U.S.
housing data and a weekly jobless claims report which pointed to
sustained labour market strength in the world's biggest economy.
The U.S. currency also drew strength as its counterparts
such as the euro and pound were dogged by bearish factors.
"The euro is weighed down as the (euro) zone is saddled with
weak economic fundamentals and Italian political concerns, while
its all about Brexit for the pound," said Junichi Ishikawa,
senior FX strategist at IG Securities in Tokyo.
Italy's right-wing League party will "tear apart" European
Union rules which are "strangling" the country if it scores well
in a May 23-26 European parliamentary election, Italian Deputy
Prime Minister Matteo Salvini said on Thursday. Salvini's challenge to EU fiscal rules has been a key source
of the worry for the euro, which has fallen 0.5% this week.
The safe-haven yen also stood to benefit from the woes in
Europe and elsewhere.
"Fiscal risks related to Italy is a theme sure to captivate
speculative market players. Any resulting 'risk off' could
benefit the yen not only against the euro, but against the
dollar as well," said Yukio Ishizuki, senior currency strategist
at Daiwa Securities.
The euro was steady at $1.1178 EUR= after falling to
$1.1166 overnight, its lowest since May 6.
The common currency was up 0.15% at 122.91 yen EURJPY= . It
has retreated 0.5% against the yen this week, during which it
slid to 122.06, lowest since early January.
Britain faces a potentially disorderly exit from the
European Union as Prime Minister Theresa May has struggled to
keep her Brexit deal and her premiership.
The possibility of a chaotic departure from the EU has
pushed the pound to a three-month trough of $1.2783 GBP=D4 on
Friday. Sterling last traded at $1.2787, having slumped 1.6%
this week.
The dollar extended overnight gains, adding 0.1% to 109.955
yen JPY= .
Against the safe-haven yen the greenback fell to a
3-1/2-month low of 109.020 at the start of the week when a trade
war between the United States and China intensified.
The Australian dollar was steady at $0.6893 AUD=D4 .
The Aussie was in close reach of a 4-1/2-month trough of
$0.6886 plumbed on Thursday after soft domestic employment data
heightened expectations for an interest rate cut by the Reserve
Bank of Australia.
Elsewhere, the Turkish lira edged down 0.3% to 6.0670 per
dollar TRYTOM=D4 after the United States on Thursday
terminated Turkey's preferential trade treatment that allowed
some exports to enter the country duty free. Softening the blow
slightly, Washington halved its tariffs on Turkish steel imports
to 25% from 50%. The 10-year U.S. Treasury note US10YT=RR yielded 2.405%,
having pulled back from a near two-month low of 2.354% brushed
the previous day.