* Dollar index little changed, but holds well above last
* Euro loses steam as short-covering rally fades
* U.S.-euro zone yield differentials could weigh on euro
(Updates prices, adds comments)
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 80.607 , keeping
above a near two-week trough of 80.240 touched last Friday.
The greenback held its ground 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
The common currency was steady at $1.3591, after
having lost 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 has widened to levels above 36 basis points this
week, , the fattest since 2007.
Against sterling, the euro eased 0.1 percent to about 80.84
pence, not very far from an 18-month low of 80.64
pence set last Thursday.
Against the yen, the dollar eased 0.1 percent to 102.39 yen
, down from a one-month high of 102.80 yen touched on June
A trader for a Japanese bank in Singapore noted talk earlier
in the day of dollar-selling versus the yen by Japanese
exporters. The market chatter follows the greenback's gains
versus the yen over the past few weeks.
A rise in the benchmark 10-year U.S. Treasury yield from an
11-month low of 2.042 percent set in late May has
helped bolster the greenback's appeal. The 10-year U.S. Treasury
yield last stood near 2.60 percent.
Meanwhile, the yen has been pressured recently by gains in
Japan's Nikkei share average, which touched a three-month high
earlier this week
Gains in Tokyo equities is seen as negative for the yen,
since sustained rises in stocks could bolster Japanese
investors' risk tolerance and whet their appetite for overseas
assets over the medium term.
(Editing by Shri Navaratnam)