FOREX-Dollar at 3-1/2-month high on firmer yields, U.S. growth

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* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(Updates currency prices, adds analyst comment)
By John McCrank
NEW YORK, March 8 Reuters) - The U.S. dollar hit a
3-1/2-month high against a basket of currencies on Monday on
expectations of strong U.S. economic growth and rising
inflation, which also sent Treasury yields higher, boosting the
greenback's safe-haven appeal.
After falling 4% in the last quarter of 2020, the dollar has
strengthened nearly 2.5% year-to-date as investors expect the
broad rise in U.S. bond yields to weigh on frothy equity
valuations and drive demand for the U.S. currency.
"If we continue to see yields rise, that's going to be very
dollar positive and there's nothing really getting in the way,"
said Edward Moya, senior market analyst at OANDA in New York.
Strong U.S. jobs numbers and the Senate's approval of
President Joe Biden's $1.9 trillion recovery package also
bolstered the dollar.
"The U.S. labor market is healing quickly, President Biden's
gargantuan relief package has been approved by the Senate, and
America has stepped up its immunization game, administering a
record number of vaccines this weekend," said Marios
Hadjikyriacos, an investment analyst at XM.
U.S. Commerce Secretary Gina Raimondo on Monday said a
strong dollar was "good for America" and rejected calls for a
weakening of the greenback. U.S. Treasury yields were within striking distance of a
one-year high above 1.62% hit on Friday, contrasting with German
yields, which dipped nearly 5 basis points last week, pulling
the euro EUR=EBS to a near four-month low below $1.19.
The dollar index =USD was up 0.53% at 92.38 against a
basket of six major currencies, its highest level since Nov. 24.
MSCI's emerging market currency index lost as much as 0.8%
for its biggest daily drop since the pandemic roiled markets in
March 2020. The index .MIEM00000CUS slipped to a three-month
low of just under 1,700 points. With the volatility in foreign exchange, Consumer Price
Index data out on Wednesday and Producer Price Index data due
Friday will be closely watched, as will 10-year and 30-year U.S.
Treasury auctions on Wednesday and Friday, respectively.
"For the first time in more than a decade, inflation numbers
and Treasury auctions are going to start to matter," said Boris
Schlossberg, managing director of FX strategy at BK Asset
Management.
"If the data is not as jacked-up as the market thinks it
will be, then I think we'll probably have a bit of a dollar
pullback," he said.
The dollar held at a nine-month high against the yen
JPY=EBS , at 108.875 yen, and was near a one-month high versus
the British pound, at $1.3839 GBP=D3 .

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World FX rates https://tmsnrt.rs/2RBWI5E
USD positions https://tmsnrt.rs/2PNeqHz
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