FOREX-Dollar regains footing as U.S. yields stabilise

* 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 regained
footing on Wednesday, clawing back some of its losses sustained
overnight, as U.S. bond yields stabilized following a 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.
Against the yen JPY=EBS , another traditional safe-haven
currency, the greenback traded 0.3% higher at 108.80 yen,
following its retreat from a nine-month peak of 109.235.
Investors will have their eye on U.S. inflation numbers due
later on Wednesday.
Traders are also wary bond 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 10-year auction today will be
followed by a 30-year UST auction tomorrow) is the main risk to
market sentiment today should low demand reinstate pressure on
the fragile UST market," 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 1.5630% on Wednesday in European trade after a three-day
drop from a one-year high of 1.6250%.
The dollar index =USD strengthened about 0.1% to 92.099,
after retreating from a 3-1/2-month high of 92.506 the previous
day.
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.
The euro EUR=EBS was 0.1% lower at $1.18890.
The European Central Bank meets Thursday and one topic will
dominate: what to do about rising sovereign bond yields which if
left unchecked could derail efforts to get a coronavirus-hit
economy back on track. "Although the recent move in bond yields has not spared the
euro zone, the tightening in financial conditions has been far
less of a problem for the ECB given the different nominal
starting point," said Geoff Yu, EMEA market strategist at Bank
of New York Mellon.
"Furthermore, the dollar's consequent strength from higher
U.S. real yields represents a loosening in financial conditions
for the euro zone and eases the pressure on the ECB to act. If
anything, the ECB will hope to maintain the status quo for
monetary policy in absolute and relative terms."
The Aussie AUD= weakened 0.4% to $0.7691 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 0.3% to $0.7153 following
a 0.8% increase on Tuesday.
In cryptocurrencies, bitcoin BTC=BTSP traded flat at
54,910. It hit a record high of $58,354.14 on Feb. 21.

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