* Dollar holds gains even as U.S. inflation cools a bit
* Euro hits 8-month low vs dollar, 5-1/2-month low vs yen
* Yen, Swiss franc retreat as global stock prices climb
* Aussie rises after central banker mum on recent strength
(Updates market action, adds quote)
By Richard Leong
NEW YORK, July 22 The dollar rose on Tuesday as
U.S. bond yields stood firm on the view that the world's biggest
economy is expanding enough for the Federal Reserve to raise
interest rates next year despite data showing a mild rise in
domestic prices in June.
The euro fell to an eight-month low against the greenback,
breaking below key support at $1.35, largely on expectations the
European Central Bank will provide more stimulus to aid the
fragile Eurozone economy. The euro also hit a 5-1/2 month low
versus the Japanese yen.
The yen and Swiss franc gave back some of their recent gains
against the dollar as traders stepped back into stock markets
and riskier assets worldwide. The losses of the two currencies,
however, were limited due to the ongoing violence in Ukraine and
the Middle East, analysts said.
Inflation "continues to be on a rising trend in the U.S. It
fits nicely to the view the Fed might raise rates sooner rather
than later," said Joe Manimbo, senior market analyst at Western
Union Business Solutions in Washington.
The benchmark U.S. 10-year Treasuries yield was
little changed at 2.469 percent after the U.S. government
reported domestic inflation rose 0.3 percent in June, matching
analyst forecasts, but core inflation, which strips out volatile
food and energy costs, crept up 0.1 percent, half of what
analysts had projected.
The weaker-than-expected core inflation reading was not
enough to change the market's outlook that the Fed will continue
on its slow path to paring its bond purchase program in October
and raise interest rates in the latter half of 2015.
U.S. yields briefly turned higher as Wall Street share
The euro lost 0.4 percent against the dollar to
$1.3469, hitting a U.S. session low at $1.3460, the lowest level
since Nov. 21. It traded at 136.64 yen, down 0.37
percent, after falling earlier to as low as 136.58 yen, a level
last seen on Feb. 5, according to Reuters data.
"With the divergence in policy stands, that supports the
dollar to strengthen against the euro," said Eric Villoria,
currency strategist at Wells Fargo Securities in New York.
The yen and the Swiss franc, which traders had piled into on
geopolitical uncertainty, declined against the dollar as
investor anxiety about the fighting in Ukraine and Gaza relaxed
The greenback edged up 0.06 percent to 101.43 yen and
rose 0.5 percent to 0.9022 Swiss francs.
Among other developed currency markets, the Australian
dollar rose after the country's central bank chief, Glenn
Stevens, said he was happy with current interest rate levels and
made no attempt to talk down the currency.
The Aussie traded 0.2 percent higher versus the
dollar at $0.9394.
(Additional reporting by Patrick Graham in London; Editing by
Peter Galloway and Paul Simao)