FOREX-Dollar rally pauses as investors take stock of inflation anxiety

* Dollar loses steam as bond yields dip after strong data
* Inflation worries likely to remain as U.S. economy reopens
* Bitcoin near 2 1/2-month on Tesla about-face, Binance
probe
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, May 14 (Reuters) - The dollar took a breather on
Friday but looks set to post weekly gains against a basket of
currencies as investors try to assess the risk of U.S. inflation
rising faster than expected and prodding the Federal Reserve to
hike interest rates sooner.
A strong reading on U.S. wholesale prices and jobless claims
on Thursday failed to spark a renewed uptick in Treasury yields,
which some traders put down to the market already pricing in a
degree of inflation worries.
Moreover, the Federal Reserve has been sticking to its
script that its stimulus will be in place for some time to
support the economy, with officials viewing a spike in inflation
as transitory.
All the same, given the U.S. economic normalisation is
gathering steam, market players say underlying inflation
concerns will remain for now.
"Inflation will remain a big theme for markets in coming few
months. The Fed says it will be transitory but markets are
asking 'what if it turns out not to be transitory," said Yukio
Ishizuki, senior strategist at Daiwa Securities.
In early Friday trade, the dollar index paused at 90.752
=USD , sitting on a gain of 0.5% so far this week and keeping
some distance from its 2-1/2-month low of 89.979 set on Tuesday.
Against the yen, the dollar stood at 109.50 yen JPY= , off
Thursday's one-month high of 109.785.
The euro was fetching $1.2076 EUR= , holding above
Thursday's low of $1.20515 while the British pound changed hands
at $1.4047 GBP=D4 .
The U.S. producer price index rose 0.6% in April after
surging 1.0% in March. In the 12 months through April, the PPI
shot up 6.2%. That was the biggest year-on-year rise since the
series was revamped in 2010 and followed a 4.2% jump in March.
A separate report showed the number of Americans filing new
claims for unemployment benefits dropped to a 14-month low of
473,000.
Strong data, coming after a stunning jump in consumer
inflation announced on Wednesday, added to the evidence
inflationary pressure is building up in the United States as
vaccine rollouts prompts economic normalisation.
On Thursday, however, U.S. bond yields dipped, with the
10-year Treasuries yield slipping to 1.651% US10YT=RR after
hitting a five-week high of 1.707%.
In crypto currencies, bitcoin flirted with 2-1/2-month lows
after Tesla Inc TSLA.O chief Elon Musk reversed his stance on
accepting the digital currency and on news of a U.S. probe into
Binance, one of the world's biggest cryptocurrency exchanges.
The world's biggest cryptocurrency last traded at $49,222
BTC=BTSP , having fallen to as low as $45,700 on Thursday, its
lowest level since March 1.
The second-biggest cryptocurrency ether dropped to $3,656
ETH=BTSP , off a record high of $4,380.64 hit on Wednesday.
Moving in the opposite direction, dogecoin, a relatively new
coin promoted by Musk, jumped as much as 20% after he said he
was involved in work to improve the token's transaction
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World FX rates https://tmsnrt.rs/2RBWI5E
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