FOREX-Dollar drops as traders prepare for inflation data

* Dollar falters, extending losses last week
* U.S. inflation data due on Tuesday
* Euro climbs above $1.19, sterling bounces off two-month
low
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(Adds chart, new analyst quote, latest prices)
By Tommy Wilkes
LONDON, April 12 (Reuters) - The dollar slipped on Monday
towards a three-week low as Treasury yields traded near recent
lows and traders awaited crucial U.S. inflation and retail sales
data in coming days.
Elsewhere, it was a quiet start to a data-heavy week for
foreign exchange markets. The euro climbed back above $1.19
while the British pound rebounded from a two-month low.
The dollar's performance has been tied to U.S. Treasury
yields for most of 2021, after concern about rising inflation in
the United States and a stimulus-fuelled economic rebound
triggered a jump in Treasury yields in February.
A fall in U.S. yields last week triggered the worst week for
the dollar in 2021. With yields inching lower on Monday, it was
back under pressure.
Federal Reserve Chairman Jerome Powell said in a U.S. media
interview released on Sunday that the U.S. economy was at "an
inflection point" and looked set for a strong rebound in the
coming months, but he also warned of risks stemming from a hasty
re-opening. Investors are now waiting for U.S. March inflation data due
on Tuesday.
"We are set to see the first evidence of the much
anticipated surge in inflation that is widely expected through
the coming months as base effects from a year ago begin to take
effect as the sharp declines post-COVID start to fall out of the
annual calculations," MUFG analysts said.
They said the dollar's fortunes could well "remain linked to
10-year yields".
The benchmark 10-year Treasury yield US10YT=RR was at
1.664% after dropping to as low as 1.6170% last week. It had
surged to a more than a one-year high of 1.7760% on March 30.
The dollar index, which measures the U.S. currency against a
basket of currencies, weakened 0.2% to 92.03 =USD . The euro
initially dropped but later recovered and was up 0.1% to $1.1915
EUR=EBS .
Bitcoin BTC=BTSP traded above $60,000, closing the gap to
its record high.
Against the pound the dollar initially gained before
reversing course. The British currency was last up 0.5% at
$1.3763 after briefly touching a two-month low of $1.3669
GBP=D3 as traders cheered the latest phase of the government's
economic re-opening plan.
The dollar fell 0.3% to 109.33 yen JPY= versus the
Japanese currency.
U.S. dollar net short positions have fallen to their lowest
in nearly three years, according to data published on Friday.
ING analysts noted that speculators had cut their net short
dollar positions for the 12th consecutive week, which could
prove a headwind for further dollar gains.
"At this stage, the dollar has lost all its positioning
"advantage", having a neutral speculative positioning, which
suggests we should no longer see dollar rallies against most G10
currencies exacerbated by the unwinding of USD shorts," they
wrote.

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(Editing by Susan Fenton, Larry King)