FOREX-Dollar resumes rebound from multi-year lows as yields provide support

* Dollar index trades higher
* Sterling gains against euro

(Updates to U.S. afternoon)
By Saqib Iqbal Ahmed
NEW YORK, Jan 13 (Reuters) - The U.S. dollar on Wednesday
resumed its rebound from near three-week lows, rising broadly on
hopes of higher government spending by President-elect Joe
Biden's incoming administration and an ongoing economic recovery
from the coronavirus crisis.
A rise in U.S. Treasury yields, driven by expectations that
Biden's administration will ramp up spending, has helped boost
the battered dollar in recent sessions, although it slumped on
Tuesday.
The greenback has also found support from expectations of a
continued economic recovery in the United States, even as
countries in Europe resort to lockdowns to fend off a second
COVID-19 wave.
"You are seeing a continuance of the U.S. outperformance
trade," Karl Schamotta, chief market strategist at Cambridge
Global Payments in Toronto.
U.S. Treasury yields slid on Wednesday as the Treasury
Department completed its final sale of $120 billion in
coupon-bearing supply this week, in which investors showed
strong demand for long-dated bonds. Yields on the benchmark Treasury note US10YT=RR dropped to
1.071%, down from an almost 10-month high of 1.187% on Tuesday.
Still, the pop in the 10-year Treasury yield above 1% has
put a firmer floor under the dollar, Joe Manimbo, senior market
analyst at Western Union Business Solutions, said in a note.
The U.S. dollar index =USD was 0.37% higher at 90.359. The
index has climbed 1.3% since falling to near a three-year low of
89.21 last week.
The rally has raised worries about the viability of betting
on further losses for the dollar after its 7% decline last year.
Data on Wednesday showed U.S. consumer prices increased
solidly in December amid a surge in the cost of gasoline, though
underlying inflation remained tame as the COVID-19 pandemic
weighed on the labor market and services industry. "Overall, the firm headline December CPI gain was mostly due
to an energy price pop that is extending into January, though
lean readings for the core components suggest little risk of the
inflation figures heating up anytime soon," Michael Englund,
chief economist at Action Economics, said in a note.
Sterling hit a seven-week high against the euro on
Wednesday, building on gains during the previous session when
the Bank of England's governor dismissed the idea of negative
interest rates, while optimism over the pace of Britain's
vaccination rollout also offered support. GBP/

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World FX rates https://tmsnrt.rs/2RBWI5E
The dollar versus Treasury yields https://tmsnrt.rs/3iaOy25
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