* Commodity currencies pare big advances from overnight
* Bitcoin retreats after earlier topping $55,000
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Ritvik Carvalho
LONDON, March 10 (Reuters) - The U.S. dollar rose on
Wednesday, clawing back some of its losses sustained overnight,
as U.S. yields found a floor following their drop from one-year
highs.
Riskier currencies including the Australian and New Zealand
dollars retreated after logging big gains on Tuesday. Bitcoin
BTC=BTSP turned lower after earlier topping $55,000 for the
first time since Feb. 22.
The euro EUR=EBS was 0.05% lower at $1.18940 after
bouncing off a 3-1/2-month low of $1.18355 on Tuesday.
Against the yen JPY=EBS , another traditional safe-haven
currency, the greenback traded 0.2% higher at 108.68 yen,
following its retreat from a nine-month top of 109.235.
Investors will have their eye on U.S. inflation numbers due
later today.
Traders are also wary yields could rise further this week as
the market will have to digest a $120 billion auction of 3-,
10-, and 30-year Treasuries, especially after last week's soft
auction and a 7-year note sale that saw a spike in yields.
"Particularly the latter (the 10y auction today will be
followed by a 30y UST auction tomorrow) is the main risk to
market sentiment today should low demand reinstate pressure on
the fragile UST market (the non-negligible decline in UST yields
was a key factor behind the risk rally yesterday)," said ING
strategists in a daily note.
"Equally, a good take-up could reiterate the risk-friendly
mood in FX markets observed yesterday. Hence, one should get
ready for a day of volatility with the FX market looking for
signs of confirmation as to whether the risk rally yesterday was
a short-term blip or the tentative start of a trend."
The dollar index has closely tracked a surge in Treasury
yields in recent weeks, both because higher yields increase the
currency's appeal and as the bond rout shook investor
confidence, spurring demand for the safest assets.
The benchmark 10-year Treasury yield US10YT=RR stabilised
around 1.5490% on Wednesday in European trade after a three-day
drop from a one-year high of 1.6250%.
The dollar index =USD strengthened about 0.2% to 92.147 in
Asia on Wednesday, after falling back sharply from a 3-1/2-month
high of 92.506 overnight. It was last 0.1% higher at 92.027 in
European trade.
Bond investors have been selling on bets that a
faster-than-expected economic rebound would spark a surge in
inflation, with President Joe Biden expected to sign a $1.9
trillion coronavirus aid package as soon as this week.
Many analysts still expect the dollar to weaken over the
course of this year, but the speed of recent gains has forced
some to adjust their views.
Westpac, which last week was talking about selling the
dollar index into 91, now sees it reaching as high as 94.50
before resuming last year's downtrend as the rest of the world
closes the gap with the U.S. economic recovery.
"Global reflation is alive and well, and Europe will get her
vaccination act together at some point too," Westpac strategists
wrote in a note.
"A continuation of the global recovery ... should see
commodity currencies outperform."
The Aussie AUD= dropped 0.2% to $0.7700 after jumping 1%
overnight, as a top central banker rebuffed market chatter about
early rate increases, helping pull local yields lower. AUD/
New Zealand's kiwi NZD= slipped 0.2% to $0.7156 following
a 0.8% increase on Tuesday.
In cryptocurrencies, bitcoin BTC=BTSP rose as high as
$55,855 on Wednesday before dropping back to $54,729. It hit a
record high of $58,354.14 on Feb. 21.
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