FOREX-Spike in yields lifts dollar after post-Fed wobble

* U.S. 10-year Treasury rises past 1.70% to 13-month high
* Dollar index up from lows hit after Fed
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, March 18 (Reuters) - Spiking U.S. bond yields
boosted the dollar on Thursday, helping it to revive from
two-week lows after the Federal Reserve's push back against
speculation over interest rate hikes.
U.S. 10-year Treasury yields hit their highest levels in
13-months in morning deals in London, climbing above 1.70% for
the first time since Jan. 24, 2020. US10YT=RR The dollar index, which measures the greenback against a
basket of peers, rose as much as 0.4% to 91.671, off a two-week
low of 91.300 hit after Wednesday's Fed meeting.
Fed Chair Jerome Powell dampened speculation the stronger
economic outlook could propel the central bank to wind back its
stimulus. The U.S. central bank sees the economy growing 6.5% this
year, which would be the largest annual jump in gross domestic
product since 1984. Inflation is expected to exceed the Fed's 2%
target to 2.4% this year, although officials think it will move
back to around 2% in subsequent years.
"The question remains whether the Fed can actually arrest
the latest spike in U.S. Treasury yields especially given that
the improvement of U.S. fundamentals will continue," Valentin
Marinov, head of G10 FX research at Credit Agricole in London,
said. "The renewed spike of UST yields should continue to
support the dollar vs. low-yielders like the euro, yen and the
Swiss franc."
Marinov said the Fed meeting had disappointed dollar bulls
and the currency may been seen "nursing its wounds vs.
risk-correlated and commodity currencies in the very near term".
The euro eased to $1.19505 EUR= , off a one-week high of
$1.19900 hit after rallying 0.6% on Wednesday.
Against the yen, the dollar gained 0.3% to 109.120 yen
JPY= .
A Nikkei report said the Bank of Japan (BOJ) was expected to
slightly widen an implicit band in which it allows long-term
interest rates to move around its 0% target. A Reuters poll this month found two thirds of Japanese firms
had expected the BOJ to curb rises in long-term interest rates
and keep them steady ahead of the central bank's review this
week on how to make its stimulus policy more sustainable.
The British pound traded flat at $1.3963 GBP=D3 .
The Bank of England is expected later on Thursday to keep
its benchmark Bank Rate at a historic low of 0.1% and its
bond-buying programme unchanged at 895 billion pounds.

"Similar to what we've seen from the Fed, the Bank of
England will talk up their prospects of the economy relative to
where we've been, but at the same time emphasize that we're
still a long way from full recovery," Rodrigo Catril, senior
currency strategist at National Australia Bank in Sydney, said.
"We expect the BoE to gently warn against the shift in
market pricing from a rate cut to around 50bps of hikes over the
next three years."
The Australian dollar rose to a two-week high of $0.7849
AUD=D4 , before trimming some gains. Its New Zealand
counterpart briefly lost momentum after the country posted a
surprise contraction in GDP in the final three months of last
year. The kiwi dollar last traded at $0.7238 NZD=D4 .
Bitcoin BTC=BTSP held firm at $58,213.06, having bounced
from Tuesday's one-week low of $53,221.

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