FOREX-Dollar heads for second weekly loss on Fed's lower-for-longer stance

* Greenback set for 0.5% drop this week after hitting
1-month low
* Benchmark yield fell most in 5 months despite strong U.S.
data
* Federal Reserve officials continue to bang
lower-for-longer drum
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, April 16 (Reuters) - The dollar headed for its worst
back-to-back weekly drop this year amid an extended retreat in
Treasury yields as investors increasingly bought into the
Federal Reserve's insistence of keeping an accommodative policy
stance for a while longer.
The benchmark 10-year Treasury yield US10YT=RR dipped to a
one-month low of 1.528% overnight, moving further away from over
a one-year high of 1.776% reached at the end of last month, even
in the face of Thursday's stronger-than-expected retail sales
and employment data. San Francisco Fed President Mary Daly said on the same day
that the U.S. economy is still far from making "substantial
progress" toward the central bank's goals of 2% inflation and
full employment, the bar the Fed has set for beginning to
consider reducing its support for the economy. That echoed Fed Chair Jerome Powell's comments in several
speeches over the past week that policymakers will look through
near-term rises in prices amid ongoing slack in the labour
market.
The dollar index =USD , which tracks the greenback against
six major peers, dipped to an almost one-month low of 91.487 on
Thursday before steadying to 91.654 in the European session.
It's set for a 0.5% decline for the week, extending the 0.9%
slide from the previous week.
The gauge, also known as the DXY, had surged with Treasury
yields to an almost-five-month high at 93.439 on the final day
of March, on bets that massive fiscal spending coupled with
continued monetary easing will spur faster U.S. economic growth
and higher inflation, particularly compared to places like
Europe.
But bond and foreign-exchange markets now seem willing to
give the Fed the benefit of the doubt that inflation pressure
will be transitory and monetary stimulus will remain in place
for years to come.
"One of the biggest perceived risks to the 2021 recovery
story playing out in financial markets is a bond tantrum – or a
disorderly rise in U.S. yields," ING's global head of markets
and regional head of research for UK and CEE, Chris Turner said.
"Thus, it has been surprising this week to see the large
decline in U.S. yields, despite above consensus U.S. CPI and
retail sales."
Retail sales increased 9.8% last month, beating economists'
expectations for a 5.9% rise, while first-time claims for
unemployment benefits tumbled last week to the lowest level in
more than a year, separate reports showed Thursday. The dollar traded at 108.94 yen JPY=EBS , heading for a
0.8% loss for the week, following a 0.9% decline the previous
week.
"We are tempted to say that DXY made an important corrective
high at 93.44 at the end of March – and is now heading for a
retest of the year's lows at 89.21," Turner said.
The euro EUR=EBS changed hands at $1.1977, set for a 0.5%
weekly advance, adding to the previous period's 1.3% surge.
Some analysts also pointed to Wall Street's strong gains,
with the S&P 500 and Dow both posting record highs, as weighing
on the traditionally safe-haven dollar amid increased risk
appetite.
"From a cross-asset perspective, we are seeing a theme in
markets, which seems similar to last year in the sense of
falling real US yields, rising commodities, declining vol,
strengthening equities and general dollar weakness," said Mikael
Olai Milhøj, chief analyst at Danske Bank.
Highly anticipated economic data from China on Friday
ultimately had little effect on currencies, even as the world's
second largest economy posted record 18.3% growth in the first
quarter year-on-year. The Chinese yuan slipped 0.1% to 6.5230 per dollar in the
offshore market. CNH=EBS
In cryptocurrencies, Bitcoin BTC=BTSP stood around
$61,583, below the record high of $64,895 reached on Wednesday,
when cryptocurrency platform Coinbase COIN.O made its debut in
Nasdaq in a direct listing. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates https://tmsnrt.rs/2RBWI5E
Dollar set for second weekly loss https://tmsnrt.rs/3mTL4Dv
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