FOREX-Dollar gains, riskier currencies lose out as U.S. yields rise again

* Dollar index up 0.4%, still set for weekly loss
* Aussie down 0.5%
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

LONDON, March 12 (Reuters) - The dollar rose on Friday,
recovering its losses from the day before, as a spike in
Treasury yields early in the European session triggered a
risk-off move in global currency markets, with riskier
currencies taking a hit.
Market participants have grown wary in recent weeks that
there could be a spike in inflation caused by massive fiscal
stimulus and pent-up consumer demand when economies reopen from
their coronavirus lockdowns.
Although soft U.S. CPI data on Wednesday went some way to
calm those fears, U.S. Treasuries sold off again on Friday, with
the 10-year yield rising above 1.6%.
The dollar was up 0.4% on the day at 0840 GMT, at 91.835
=USD . But it was still below the high of 92.506 it reached on
Tuesday, which was its strongest since November 2020.
"There is concern over inflation in the months ahead and
that sense is dollar-supportive," said Neil Jones, head of FX
sales at Mizuho.
"It looks like pretty upbeat in the United States in terms
of rollout of further vaccine plays, and of course that feeds
into the economic recovery in the States, and a time when fiscal
stimulus is extremely high, monetary stimulus is extremely
high," he said.
President Joe Biden told U.S. states on Thursday to make
all adults eligible for a coronavirus vaccine by May 1, hours
after he signed a $1.9 trillion stimulus bill into law.
The dollar index was still on track to end the week down by
around 0.1% and Mizuho's Jones said he thought the strengthening
on Friday was likely to be temporary.
"My personal view is that the dollar is not on a trajectory
for a higher fundamental trend," he said.
Riskier currencies lost out, erasing recent gains. The
Australian dollar - which is seen as a liquid proxy for risk
appetite - fell by 0.5% to 0.77457 versus the U.S. dollar at
0841 GMT AUD=D3 .
The New Zealand dollar was down around 0.6% against the U.S.
dollar NZD=D3 . The Norwegian crown lost out to both euro and
dollar.
The European Central Bank said on Thursday that it would
increase the pace of its money printing to prevent a rise in
euro zone bond yields. Although the euro was down around 0.5% at $1.19325 at 0841
GMT, it was still set to end the week up 0.2% overall EUR=EBS .
Market attention now turns to the U.S. Federal Reserve's
meeting next week, where traders will be looking for any
comments about rising yields.
ING strategists wrote in a note to clients that the market
will probably wait until after the Fed's meeting before pushing
the dollar index into 90 and 91 territory.
Dollar-yen was up around 0.6%, changing hands at 109.140 at
0842 GMT JPY=EBS . That's close to the peak of 109.235 reached
on Tuesday, which had been the yen's weakest since June 2020.
The dollar was gaining some support versus Asian currencies
because of rising U.S.-China tensions, said Derek Halpenny, head
of research at MUFG.
The Biden administration amended licenses for companies to
sell to China's Huawei, further restricting companies from
supplying items that can be used with 5G devices.
Elsewhere, bitcoin traded around $56,738 at 0838 GMT, having
come close to, but not exceeded, its recent record high of
$58,354.14 BTC=BTSP .

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