FOREX-Dollar strengthens, wiping out weekly loss, as U.S. Treasury yields rise again

* Dollar index up 0.5%, reversing week's losses
* Aussie down 0.7%
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(Updates prices, adds comment and chart)
By Elizabeth Howcroft
LONDON, March 12 (Reuters) - A fresh spike in U.S. Treasury
yields sparked a risk-off move in global currency markets on
Friday, with the dollar reversing its fall from earlier in the
week and riskier currencies taking a hit.
Market participants have grown wary in recent weeks that
there could be a spike in inflation caused by massive fiscal
stimulus and pent-up consumer demand when economies reopen from
coronavirus lockdowns.
Although soft U.S. CPI data on Wednesday went some way to
calm those fears, U.S. Treasuries sold off again on Friday, with
the 10-year yield rising above 1.6%.
The dollar was up 0.5% on the day at 91.907 =USD by 1149
GMT, and on track to end the week little changed overall having
failed to regain Tuesday's peak of 92.506, which was its
strongest since November.
"There is concern over inflation in the months ahead and
that sense is dollar-supportive," said Neil Jones, head of FX
sales at Mizuho.
"It looks like pretty upbeat in the United States in terms
of rollout of further vaccine plays, and of course that feeds
into the economic recovery in the States, and a time when fiscal
stimulus is extremely high, monetary stimulus is extremely
high," he said.
President Joe Biden told U.S. states on Thursday to make
all adults eligible for a coronavirus vaccine by May 1, hours
after he signed a $1.9 trillion stimulus bill into law.
Mizuho's Jones said he thought the strengthening on Friday
was likely to be temporary.
"My personal view is that the dollar is not on a trajectory
for a higher fundamental trend," he said.
Riskier currencies lost out, erasing recent gains. The
Australian dollar - which is seen as a liquid proxy for risk
appetite - fell by 0.7% to 0.774310 versus the U.S. dollar
AUD=D3 .
The New Zealand dollar was down around 0.9% against the U.S.
dollar NZD=D3 . The Norwegian crown lost out to both the euro
and dollar.
The European Central Bank said on Thursday that it would
increase the pace of its money printing to prevent a rise in
euro zone bond yields. Although the euro was down around 0.6% at $1.1918, it was
set for a small weekly gain EUR=EBS .
"The ECB "holistic" approach to keep financing conditions
favorable is too vague in our view to focus minds and drive the
EUR lower; the US data and the Fed remain the main market
drivers," BofA FX strategists wrote in a note to clients.
Market attention now turns to the U.S. Federal Reserve's
policy meeting next week, where traders will be looking for any
comments about rising yields.
ING strategists wrote in a note to clients that the market
will probably wait until after the Fed's meeting before pushing
the dollar index into 90 and 91 territory.
Dollar-yen was up around 0.4%, changing hands at 108.945
JPY=EBS , close to the 109.235 reached on Tuesday which had
been the yen's weakest since June 2020.
Versus China's offshore yuan, the dollar was up around 0.5%
CNH=EBS .
The dollar was gaining some support versus Asian currencies
because of rising U.S.-China tensions, said Derek Halpenny, head
of research at MUFG.
The Biden administration amended licences for companies to
sell to China's Huawei, further restricting companies from
supplying items that can be used with 5G devices.
Elsewhere, bitcoin dipped to $56,475.11, having come close
to, but not exceeded, the recent record high of $58,354.14
BTC=BTSP .

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