FOREX-Dollar rises on rates, euro anxieties

Wed Jun 4, 2014 3:12pm EDT

Related Topics

* Dollar benefiting from rise in U.S. yields this week
    * ECB rate decision on Thursday overhangs market
    * Euro eases 0.20 percent

 (Adds further dollar increase, comments, updates prices)
    By Michael Connor
    NEW YORK, June 4 (Reuters) - The U.S. dollar rose on
Wednesday, getting lift from fatter Treasury yields and investor
anxieties about likely market-moving policy shifts by central
bankers looking to spur Europe's economy.
    After trading very near $1.40 within the past month, the
euro has been talked down by European Central Bank
officials widely expected to cut interest rates Thursday or
institute other monetary easings likely to discourage buying of
the currency shared by 18 countries.
    On Wednesday, the euro last traded off 0.20 percent against
the dollar at 1.3603 after earlier dipping under $1.36.
    "There are a lot of questions about how big the rate cut
will be," said Lane Newman, director of foreign exchange at ING
Capital Markets in New York. "Rates here are expected to be
higher before lower. Obviously, the rates in the eurozone are
going to be lower before higher. That's benefiting the dollar
across the currency universe."
     The dollar last stood up 0.25 percent at 102.73 yen 
after trading as high as 102.79 yen, near a level last touched
on May 5.
    The U.S. dollar index, composed of six major currency
pairs, was last up 0.14 percent at 80.668 after peaking at
80.677.
    Early gains by the dollar against the euro and other
currencies were trimmed by the ADP National Employment Report,
according to currency strategist Martin Schwerdtfeger at TD
Securities in Toronto.
    Private employers added 179,000 jobs to their payrolls in
May, ADP data showed. That compared with 215,000 jobs in April
and was below economists' expectations for a gain of 210,000
jobs in May in the government's comprehensive employment report
due on Friday. 
    Longer-dated U.S. Treasury yields have risen 20 basis points
in the past week and the spread between two-year German and U.S.
government bonds - the most directly responsive to interest rate
moves - is within a whisker of its highest since mid-2007.
    The benchmark 10-year U.S. Treasury note was
down 4/32, the yield at 2.6076 percent. 
    Disappointment over the pace of U.S. economic growth in the
first quarter meant the dollar defied views of banks and
investment houses at the start of 2014 for a surge in its value.
    But expectations that the ECB will ease policy have
reinforced the base case for a stronger U.S. currency, and that
returns on U.S. government debt will rise while those in the
euro area fall.
    Sterling was flat at $1.6750. 

 (Reporting by Michael Connor in New York; Editing by Dan
Grebler and Nick Zieminski)
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