FOREX-Dollar heads for second week of losses as yields decline

* Greenback set for 0.5% drop this week after hitting
1-month low
* Benchmark yield fell most in 5 months despite strong U.S.
data
* U.S. Treasury FX report due, eyes on Swiss franc
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, April 16 (Reuters) - The dollar was set to post a
second week of losses on Friday amid an extended retreat in
Treasury yields, as investors increasingly bought into the
Federal Reserve's insistence it would keep an accommodative
policy stance for a while longer.
The benchmark 10-year U.S. Treasury yield US10YT=RR dipped
to a one-month low of 1.528% overnight, moving further away from
March's 1.776%, it highest in more than a year, even in the face
of Thursday's stronger-than-expected retail sales and employment
data. San Francisco Fed President Mary Daly said the U.S. economy
was still far from making "substantial progress" toward the
central bank's goals of 2% inflation and full employment, the
bar the Fed has set for beginning to consider reducing its
support for the economy. That echoed Fed Chair Jerome Powell's comments in several
speeches over the past week that policymakers will look through
near-term rises in prices amid ongoing slack in the labour
market.
The dollar index =USD , which tracks the dollar against six
major peers, fell to an almost one-month low of 91.487 on
Thursday before steadying to 91.521 by midday in London.
It's set for a 0.5% decline for the week, extending the 0.9%
slide from the previous week.
The gauge, also known as the DXY, had surged with Treasury
yields to an almost-five-month high at 93.439 on the final day
of March. Traders were betting that massive fiscal spending
coupled with monetary easing would spur faster U.S. economic
growth and higher inflation.
But bond and foreign-exchange markets now seem willing to
give the Fed the benefit of the doubt that inflation pressure
will be transitory and monetary stimulus will remain in place
for years to come.
"One of the biggest perceived risks to the 2021 recovery
story playing out in financial markets is a bond tantrum – or a
disorderly rise in U.S. yields," ING's global head of markets
and regional head of research for UK and CEE, Chris Turner said.
"Thus, it has been surprising this week to see the large
decline in U.S. yields, despite above-consensus U.S. CPI and
retail sales."
Retail sales increased 9.8% last month, beating expectations
for a 5.9% rise. First-time claims for unemployment benefits
fell last week to their lowest in more than a year, separate
reports showed Thursday. The dollar traded flat at 108.74 yen JPY=EBS , heading for
a 0.8% loss for the week, following a 0.9% decline the previous
week.
"We are tempted to say that DXY made an important corrective
high at 93.44 at the end of March – and is now heading for a
retest of the year's lows at 89.21," Turner said.
The dollar also lost ground to the Swiss franc, which hit
its highest against the greenback in over six weeks. The franc
traded 0.4% higher to the dollar at 0.9185 francs per dollar.
CHF=
The U.S. Treasury releases its latest foreign exchange
report today, in which it is expected to name Switzerland as a
currency manipulator.
The euro EUR=EBS changed hands at $1.1995, set for a 0.5%
weekly advance, adding to the previous period's 1.3% surge.
Some analysts also pointed to Wall Street's strong gains,
with the S&P 500 and Dow both posting record highs, as weighing
on the safe-haven dollar amid increased risk appetite.
"From a cross-asset perspective, we are seeing a theme in
markets, which seems similar to last year in the sense of
falling real U.S. yields, rising commodities, declining vol,
strengthening equities and general dollar weakness," said Mikael
Olai Milhøj, chief analyst at Danske Bank.
Economic data from China on Friday ultimately had little
effect on currencies, even though the world's second-largest
economy posted record 18.3% growth in the first quarter
year-on-year. The Chinese yuan slipped 0.1% to 6.5230 per dollar in the
offshore market. CNH=EBS
In cryptocurrencies, bitcoin BTC=BTSP stood around
$60,492, below the record high of $64,895 reached on Wednesday,
when cryptocurrency platform Coinbase COIN.O made its debut in
Nasdaq in a direct listing. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates https://tmsnrt.rs/2RBWI5E
Dollar set for second weekly loss https://tmsnrt.rs/3mTL4Dv
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