* Dollar climbs to two-week high vs basket of currencies
* AUD biggest loser, sheds 0.8%
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, May 12 (Reuters) - The dollar rose to a two-week
high against major peers on Tuesday, propelled by rising U.S.
bond yields and increasing safe-haven demand amid growing fears
about a second wave of coronavirus infections, which sent
riskier currencies lower.
The biggest loser was the Australian dollar, which dropped
about 0.8% to a one-week low, while the kiwi extended falls.
The euro EUR= fell below $1.08 for the first time in
almost a week and the Japanese yen nursed an overnight loss of
about 1% to sit at to 107.48 per dollar, the bottom end of a
range it has kept since mid April.
The greenback was buoyed by a steepening U.S. yield curve,
as Federal Reserve officials talked down the prospect of
negative rates, and as the bond market braces for an immense
borrowing spree from the U.S. Treasury. US/
At the same time, progress on plans to re-open economies has
been overshadowed by worries about fresh infections of COVID-19
as easing of restrictions in South Korea and Germany were soon
met by spikes in new cases there. "It's a little bit of yield support (for the dollar) and a
general return of nerves," said Westpac FX analyst Sean Callow,
as April's surge in riskier currencies fades away.
"Our base case has been for a while now that the risk bounce
was overdone, we just don't think (recovery) is going to be a
straight line."
The dollar has closely tracked investors' risk aversion
through the coronavirus crisis. However, rising longer-tenor
yields as Washington prepares to borrow some $3 trillion this
quarter have added some carry-trade attraction to the currency
as well.
Against a basket of currencies =USD , the dollar hit a
two-week high of 100.440, near the top end of the range which
has held it for more than a month.
Ten-year U.S. Treasury yields rose above 0.7% for the first
time in a week overnight and held at 0.7099% in Asia, while
two-year yields also kicked up after Atlanta Fed President
Raphael Bostic said he is "not a big fan" of negative rates.
After punching above its 100-day moving average on Monday,
the Aussie AUD=D3 retreated and slipped to $0.6432 on Tuesday
following a report that China had suspended some meat imports
from Australian abattoirs.
The unconfirmed report in The Australian newspaper, citing
unnamed industry sources, was vague about the reason but comes
as tension over the origin and handling of the coronavirus chill
relations between Australia and its biggest trading partner.
The kiwi NZD=D3 slid 0.4% to $0.6047, while the euro and
pound were a tad softer. The euro EUR= last sat at $1.0797 and
the pound GBP= slipped 0.3% $1.2300.
Besides virus headlines, markets are looking to Chinese
consumer inflation data due at 0130 GMT, where an annual rise of
3.7% is expected, according to a Reuters poll of economists.
Fed officials James Bullard and Patrick Harker are due to
make remarks at 1300 GMT and 1400 GMT, respectively, ahead of a
highly anticipated speech from chairman Jerome Powell on
Wednesday.