* Surge in oil prices lifts U.S. yields and dollar
* Euro capped by concerns over Italy's referendum
* Yen slips to 9-month low vs dollar
* Dollar helped by Trump's Treasury Secretary choice of
(Updates prices, adds quotes)
By Hideyuki Sano
TOKYO, Dec 1 The dollar touched a 9-1/2-month
high against the yen on Thursday, as oil prices surged after
OPEC agreed to output cuts - lifting inflation expectations and
U.S. bond yields.
Steven Mnuchin, President-elect Donald Trump's pick to lead
the U.S. Treasury, gave no hint of any unease over the strong
dollar in his first remarks since being named for the job,
giving traders fresh impetus to buy the U.S. currency.
The dollar's index against a basket of six major currencies
last stood at 101.42. On Wednesday, it had risen
as high as 101.83, nearing a 13-1/2-year peak of 102.05 set last
The dollar's rebound came as oil prices jumped around 9
percent on Wednesday as OPEC members agreed to cut production,
its first reduction since 2008.
The gains in oil prices stoked inflation expectations, which
in turn sent U.S. Treasury yields higher given the negative
impact of inflation on bond prices.
The higher Treasury yields fuelled demand for the dollar
relative to currencies such as the euro and yen, whose
government bond yields are still low-to-negative.
The dollar rose notably against the yen, hitting a peak of
114.83 yen earlier on Thursday, its strongest level since
mid-February. The dollar was last trading at 114.17 yen,
down 0.2 percent on the day.
"I think it is just a matter of time that the dollar will
test 115 yen after Mnuchin was silent about the dollar's
strength," said Masafumi Yamamoto, chief currency strategist at
Mnuchin said on Wednesday the administration would make tax
reform and trade pact overhauls top priorities as he outlined
Trump's economic agenda along with Wilbur Ross, Trump's nominee
for commerce secretary.
"The good news is that they seem to be saying that no one
will be tariffed up and no one will be named a currency
manipulator on day 1," Steven Englander, Global Head of G10 FX
Strategy at CitiFX in New York, wrote in a note.
In contrast, the yen was weighed down by the Bank of Japan's
policy of controlling long-term bond yields.
The euro rose to 121.55 yen, its highest level
since June 24, even though the currency was capped on the whole
ahead of Italy's referendum on Sunday, which could reject Prime
Minister Matteo Renzi's constitutional reforms, on which he has
staked his political future.
His departure could destabilise Italy's fragile banking
system and be taken as another sign of rising anti-establishment
sentiment in Europe, potentially eroding investor confidence in
the currency union.
Still, some analysts say that the market reaction may prove
relatively limited even if Italy's referendum rejects the
reforms, at least compared to the swings seen after the Brexit
vote and the U.S. presidential election.
"If there is a 'no' vote, I would expect some negative
reaction in the market. I would expect some negative reaction
from the euro, but our view is that it will be much more
contained," said Jim McDonald, chief investment strategist for
U.S.-based asset manager Northern Trust.
"The good news is that this may be a negative outcome that
the market is actually ready for, as opposed to being surprised
by both Brexit and Trump's victory," McDonald added.
The euro edged up 0.1 percent to $1.0602, but was
down from Wednesday's intraday high of $1.0666.
(Reporting by Hideyuki Sano; Additional reporting by Masayuki
Kitano; Editing by Eric Meijer and Jacqueline Wong)