CORRECTED-FOREX-Dollar reigns supreme on yields, recovery advantage

(Corrects to note sterling's three-week low was reached on
Friday, not overnight, in fourth paragraph)
* Dollar at 9 month high vs yen, 3 1/2-month high on euro
* Vaccinations fan hopes of faster U.S. economic recovery
* Emerging market currencies battered by higher U.S. yields
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, March 9 (Reuters) - The U.S. dollar held near a 3
1/2-month high against its rivals on Tuesday as higher bond
yields and expectations of faster economic normalisation from
the pandemic in the United States put the U.S. currency at an
advantage.
The dollar's index against six major currencies rose 0.1% to
92.469 =USD , its highest since late November, building on its
0.5% gains on Monday.
Against the yen, the dollar rose to 109.19 yen JPY= , its
highest level in nine months, while the euro slipped to $1.18355
EUR= , a low last seen in late November.
The safe-haven Swiss franc softened to 0.9369 per dollar
CHF= , its lowest level since late July, while the British
pound eased to $1.3818 GBP=D4 , having touched a three-week low
of $1.3779 on Friday.
"Rising U.S. bond yields are obviously driving the dollar
but what's behind them is the realisation that U.S. vaccination
programme is going ahead very fast and the U.S. economic
normalisation may happen earlier than people have expected,
perhaps by a quarter or two," said Yukio Ishizuki, senior
strategist at Daiwa Securities.
The U.S. Centers for Disease Control and Prevention (CDC)
said fully vaccinated people could meet without masks indoors in
small groups with others who have been inoculated. The recommendations come as about 30 million people, or 9.2%
of the U.S. population, have been vaccinated.
"That also leads to a question as to whether the Fed can
maintain its projections that it will not raise rates until
2023. Some policy makers may change their views at their policy
meeting next week," Ishizuki said.
The Federal Reserve will release its fresh projections when
it will conclude its two-day policy meeting on March 17.
The 10-year U.S. bond yields US10YT=RR stood near its
one-year peak hit on Friday as investors continued to price in
more upbeat prospects for the U.S. economy as well as higher
inflation. US/
Traders are wary the yields could rise further this week as
the market will have to digest $120 billion auction of 3-, 10-,
and 30-year Treasuries, especially after last week's soft
auction and a horrible 7-year note sale that saw a spike in
yields.
Higher U.S. yields have started to undermine emerging market
currencies, which had attracted investors' funds escaping
rock-bottom bond returns in the United States.
MSCI's emerging market currency index .MIEM00000CUS
dropped to a three-month low after a fall of 0.82% on Monday,
the biggest fall in about a year, with high-yielding currencies
hit hard.
The Brazilian real sank to a ten-month low BRL= while the
Turkish lira fell nearly 3% TRYTOM=D2 to its lowest level
since mid-December.
Elsewhere, gold XAU= also slipped to a nine-month low on
Monday.

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