* Dollar index steady, clings to previous day's gains
* Euro loses steam as short-covering rally fades
* U.S.-euro zone yield differentials could weigh on euro
By Masayuki Kitano
TOKYO, June 10 The dollar held steady versus a
basket of major currencies on Tuesday, clinging to gains made
the previous day thanks to higher U.S. bond yields after last
week's solid U.S. jobs report.
The dollar index stood at 80.634, staying above a
near two-week trough of 80.240 touched last Friday.
The greenback was firm against the euro, which pulled back
from last week's high of $1.3677 as a short-covering rally
following the European Central Bank's easing steps lost
momentum. The common currency was steady at $1.3590,
having lost about 0.4 percent on Monday.
A strong U.S. jobs report on Friday, and hawkish comments
from St. Louis Federal Reserve bank president James Bullard
overnight underpinned the dollar.
Bullard, who is not a voter this year on monetary policy,
said the falling U.S. unemployment rate, together with other
encouraging economic data, could prompt him to move forward his
view on when interest rates should be raised.
The retreat in the euro brought it back closer to a
four-month low of $1.3503 touched on Thursday on trading
platform EBS, shortly after the ECB cut interest rates to record
lows and took its deposit rate into negative territory for the
The euro could face further downward pressure in the near
term, hampered by a widening in interest rate differentials
between the United States and the euro zone, said Masafumi
Yamamoto, market strategist for Praevidentia Strategy in Tokyo.
"Interest rate differentials could be a driver for the euro
versus the dollar as well as the euro against sterling,"
According to Thomson Reuters data, the yield spread between
two-year U.S. Treasury yields and two-year German government
bond yields had widened to about 37 basis points on Monday
, the fattest since 2007.
Against the yen, the dollar remained in familiar territory
and last fetched 102.49 yen, staying below a one-month
high of 102.80 yen set last Wednesday.
(Editing by Shri Navaratnam)