FOREX-Dollar hits 4-month high against yen as yields jump on inflation bets

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Feb 17 (Reuters) - The dollar advanced on Wednesday,
hitting a four-month high against the yen as U.S. bond yields
jumped on the prospects of further economic recovery and a
possible acceleration in inflation.
Bitcoin held firm, a day after the cryptocurrency hit
$50,000 for the first time, bringing its total market
capitalisation to more than $900 billion, as traders bet on its
further acceptance among major companies. The dollar's index against six other major currencies jumped
back to 90.681, from a three-week low of 90.117 hit on Tuesday.
Boosting the dollar was soaring U.S. bond yields, with the
10-year yield rising to 1.331% US10YT=RR from around 1.20% at
the end of last week.
"The move up in yields has been driven by increasing
inflationary concerns amid a rise in energy prices along with
the prospect of a big U.S. fiscal stimulus and the global
recovery entering a more solid stage as vaccine roll out lead to
the reopening of economies," said Rodrigo Catril, senior FX
strategist at National Australia Bank in Sydney.
The yen, which is sensitive to U.S. yields, reacted the most
with the dollar jumping to a four-month high of 106.225 yen. It
last stood at 106.13 yen JPY= .
"I think the dollar's downtrend is over. At the start of the
year, speculators were betting on a fall in the dollar below 100
yen. They seem to have abandoned such a view now," said Yukio
Ishizuki, senior strategist at Daiwa Securities.
The euro slipped slightly to $1.2085 EUR= though its fall
was less pronounced due to its gains earlier on Tuesday
following strong German economic sentiment data. The New York Federal Reserve's Empire State manufacturing
report released on Tuesday offered an upbeat economic picture,
with a rise in its "prices paid index" stoking fear of faster
inflation.
That optimism was echoed by St. Louis Fed President James
Bullard, who told CNBC that U.S. financial conditions were
"generally good," and that inflation was likely to heat up this
year.
San Francisco Fed President Mary Daly, however, said
pressures on inflation are still downward, pushing against
critics warning low interest rates and government spending could
overheat the U.S. economy and spark high inflation. "Her comments are not resonating with market players
preoccupied with inflation at this point," said Daiwa's
Ishizuki.
The positive mood on the economic outlook is underpinning
risk-sensitive currencies.
The British pound held firm at $1.3863 GBP=D4 , having
reached its highest level since April 2018 on Tuesday. Against
the euro, the pound traded at its highest level since early May
at 87.07 pence per euro EURGBP=D4 .
The Australian dollar stood at $0.7734 AUD=D4 , down
slightly but still not far from Tuesday's one-month high of
$0.7805.
The offshore Chinese yuan also stepped back after hitting a
2-1/2-year high of 6.4010 per dollar and last stood at 6.4269
CNH= .

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