FOREX-Spiking yields steady 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
* Norwegian crown hits 13-month vs. euro
* Eyes on BoE
* 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 pushed back against
speculation over interest rate hikes.
U.S. 10-year Treasury yields rose to their highest levels in
13 months early in London trade, climbing above 1.70% for the
first time since Jan. 24, 2020. US10YT=RR The dollar index, which measures it against a basket of its
peers, rose as much as 0.4% to 91.761, 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 Fed sees the U.S. 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 versus low-yielders like the euro, yen and
the Swiss franc."
Marinov said the Fed meeting had disappointed dollar bulls
and the currency may be "nursing its wounds versus
risk-correlated and commodity currencies in the very near term".
The euro eased to $1.19405 EUR= , off a one-week high of
$1.19900 after it rallied 0.6% on Wednesday.
Norway's crown reached its strongest against the euro in 13
months - 10.0240 crowns per euro - after the country's central
bank left rates unchanged, though it shifted its forward
guidance to signal that a rate increase may follow in the second
half of this year amid signs of economic recovery. "A hint at the late 2021 rate hike was delivered (and is now
in the price), but we see risks skewed to an earlier and a
faster tightening cycle (ie two hikes possibly delivered this
year, with the first one coming in late Q3)," ING's developed
markets economist James Smith and chief EMEA FX and IR
strategist Petr Krpata said in a research note.
"This points to the generally upbeat NOK (Norwegian crown)
prospects across the board, and also against its regional peer
SEK (Swedish krona), where the Riksbank is highly unlikely to
hike interest rates either this year or next."
Against the yen, the dollar gained 0.2% to 109.050 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 before its review this week on how to make
its stimulus policy more sustainable. The British pound fell 0.2% to $1.3937. GBP=D3 , after the
Bank of England left its stimulus programme unchanged on
Thursday. The BoE also held its benchmark interest rate at a
record low of 0.1%, in line with forecasts in a Reuters poll of
economists. The Australian dollar rose to a two-week high of $0.7849
AUD=D4 before trimming some gains. Its New Zealand counterpart
lost momentum after the country posted a surprise contraction in
GDP in the final quarter of last year. The kiwi last traded at $0.7222 NZD=D4 .
Bitcoin BTC=BTSP held firm at $58,092.28, having bounced
from Tuesday's one-week low of $53,221.

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