* Dollar near overnight highs hit as market prices in
earlier Fed tightening
* Yellen's comment taken as signalling possible hike early
* Dollar strength helps push China's yuan to one-year low
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, March 20 The dollar traded near
two-week highs against a basket of major currencies on Thursday,
after comments from Federal Reserve head Janet Yellen prompted
investors to bring forward their U.S. interest rate hike
Yellen said the Federal Reserve will probably end its
massive bond-buying program this coming fall, and could start to
raise interest rates around six months later, which was sooner
than many market participants had anticipated.
"That's much earlier than the market had been pricing, so
that saw the U.S. dollar strengthen right across the board,"
said Sue Trinh, senior currency strategist at RBC Capital
Markets in Hong Kong.
"Much of the damage was done in the immediate aftermath.
We've steadied in Asia, but remain close to the highs for the
U.S. dollar across most of the pairs, with the other focus still
on China," Trinh said.
China's yuan plunged to a one-year low against the dollar
early on Thursday after the nation's central bank set a lower
guidance for the currency, largely in line with the greenback's
sharp rise on the Fed surprise.
It was the yuan's second consecutive daily fall of more than
1 percent from the central bank's midpoint, after China
announced over the weekend it would double its currency's
permitted trading range to 2 percent.
The benchmark Treasury yield steadied at 2.748
percent in Asian trade, after jumping 9 basis points to 2.77
percent on Thursday.
The overnight yield spike helped the dollar index
mark its biggest one-day move in over a month, to a peak of
80.111, its highest since March 6. It was last at 79.959.
The dollar bought 102.25 yen, not far from its nearly
one-week high of 102.69 yen touched on Wednesday, while the euro
was steady on the day at $1.3832, after plumbing a
two-week low of $1.3810.
The Canadian dollar slid to a 4-1/2 year low of
C$1.1273 against its U.S. counterpart and was last at C$1.1244,
while the Australian dollar dipped back below 91 U.S. cents
and was last at $0.9015.
Markets all but ignored Yellen's emphasis that rates will
stay low for a while and could end up staying lower than normal
"for some time" even after the economy regains its health given
lasting scars from the financial crisis.
That prompted some analysts to warn that this dollar rally
could fade just as quickly as it began, in the days ahead.
"There may be some effort by Fed officials or sources to
downplay the six-month time-frame comment," BNP Paribas analysts
wrote in a note to clients.
A Reuters poll of 17 primary dealers found 10 still
expected the first hike to come in the second half of 2015, and
four continued to tip 2016.
Yellen's remarks followed the Fed's widely expected move to
reduce its monthly purchases of U.S. Treasuries and
mortgage-backed securities to $55 billion from $65 billion.
Sterling hit one-month lows against the broadly firmer
greenback, as the new Fed guidance trumped an upbeat annual UK
budget statement in which the government upgraded its official
forecasts for economic growth.
It last traded at $1.6540, having fallen as far as
$1.6506 on Wednesday. The pound has been confined to ranges
since reaching four-year highs of $1.6823 last month.
(Editing by Richard Pullin & Shri Navaratnam)