* Dollar hits one-month highs vs euro, yen as yields rise
* Sterling gains on BoE inflation outlook
* U.S. data adds to upward pressure on dollar, yields
(Updates prices, adds comment, details)
NEW YORK, Nov 10 (Reuters) - The dollar hit a one-month
peak against the euro and yen on Wednesday as higher U.S. bond
yields prompted traders to cut bets against the greenback.
Fear about Ireland's high debt burden left investors
seeking shelter in German bunds, which also kept the euro weak
against the dollar for a fourth straight day though it was well
off the session low in volatile trading after a U.S. Treasury
bond auction.
Strong U.S. economic data, including a decline in initial
jobless claims, even had some analysts suggesting the U.S.
economy was gaining traction after months of frustratingly slow
growth. For details, see []
Investors had sold dollars in recent months and bet that
the Federal Reserve plans to pump more money into the economy
to boost growth would drive already low U.S. rates even lower.
So far, those expectations have been frustrated.
"The U.S. yield curve has steepened, and since the whole
world has had the same position on, we've got a lot of
end-of-the-year, risk management going on," said Sebastien
Galy, senior currency strategist at BNP Paribas.
The euro fell as low as $1.3671 and was last changing hands
at $1.3771 <EUR=>, little changed on the day.
"We had that drop real strong, then saw Asian central banks
and Middle East names buying the euro and keeping it above
$1.3750," said Dean Malone, a currency director at Compass FX
in Dallas, Texas.
The 1.3650 level is the 38.2 percent retracement of the low
from September 10 to the November 4 high and it seems investors
are defending it, Malone said.
BNP Paribas said it could fall as far as $1.3435 as it
retraces a multi-month rally that peaked last month at $1.4281,
a 9-1/2-month high.
YEN FALLS
The dollar climbed as high as 82.79 yen <JPY=>, up more
than 1 percent, as U.S. yields rose relative to Japanese ones
though some trading on Wednesday may be technical as it last
traded at 82.31 yen.
At the session peak of 82.79, dollar/yen broke through the
50-day simple moving average of 82.77 though it failed to hold.
It was the first breach of that average since it last traded
above that level on September 21.
Dollar/yen also broke through the 50-day exponential moving
average of 82.69 for the first time since it last traded above
that measure on September 17.
Those levels may provide resistance to further dollar
gains. Using the 14-day relative strength index, dollar/yen has
gone into overbought territory for the first time since April
5, another sign that the dollar may struggle against the yen.
The dollar briefly extended gains against the euro and yen,
climbing to a session peak against the yen on electronic
trading platform EBS in a kneejerk reaction to the 30-year
Treasury bond auction.
The prices of U.S. Treasury securities fell on Wednesday
with bond yields moving higher following a weak $16 billion
sale of 30-year bonds by the U.S. Treasury Department.
[]
But the dollar then gave up gains against the euro in what
analysts said was position adjustment after the auction.
FUNDING CURRENCY QUESTIONS
Elsewhere, sterling rose 0.8 percent to $1.6113 <GBP=D4>
after a Bank of England inflation report made further monetary
easing in the UK look less likely []. The euro
fell 0.8 percent to 85.48 pence <EURGBP=>.
The euro struggled after Portugal was forced to pay a
higher premium than previously at a bond auction and after
Ireland's central banker said Irish bond yields were at "crisis
levels." The gap between benchmark Irish and German bond yields
expanded to a euro lifetime high. []
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Graphic on Ireland's bailout challenge
http://r.reuters.com/wuv48p
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(Reporting by Nick Olivari and Steven C Johnson; Editing by
Andrew Hay)
