* Dollar supported by Fed tapering expectations
* Yen near 2-month low vs dollar on higher U.S. bond yields
* Sterling in focus ahead of BoE report
By Anirban Nag
LONDON, Nov 13 The dollar rose against the euro
and hovered close to a two-month high against the yen on
Wednesday after an influential member of the Federal Reserve
kept the door open to a first reduction in monetary stimulus in
Atlanta Fed President Dennis Lockhart, seen as a centrist in
policy terms, said on Tuesday a cut in the Fed's bond-buying
operations remained a possibility in December.
Attention now is on the comments that nominee Fed President
Janet Yellen will make at her Senate confirmation hearing on
The euro was also pegged back slightly by more signs of
falling price pressures in the euro zone, a factor that will
keep alive speculation of more monetary easing by the European
Central Bank. Data on Wednesday showed Spanish prices fell in
October for the first time in four years.
The euro slipped to $1.3430 in European trade, from a
session high of $1.34535 in Asian trade. It was still holding
above its two-month low of $1.3295 struck immediately after the
ECB cut rates last Thursday in a surprise move.
"The Spanish inflation numbers were slightly below their
earlier reading which tells you that the ECB will have to take
fresh easing measures," said Alvin Tan, currency strategist at
"Having said that, we do not expect the euro to fall sharply
against the dollar unless we get more signs that the Fed will
start to taper. For that, Yellen's confirmation hearings will be
important for near term direction in the dollar."
The dollar eased 0.1 percent to 99.52 yen, not far
from a two-month high of 99.80 yen struck on Tuesday. The
greenback is still up about 0.4 percent so far this week, as it
drew strength from rising U.S. bond yields.
Higher U.S. bond yields tend to favour the dollar by making
dollar-denominated debt more attractive to bond investors. The
10-year U.S. yield has risen almost 20 basis points
since the payroll data last Friday. Treasury yields are now
likely to take cue from Yellen's views on monetary policy.
"Since Yellen has become a candidate to succeed Ben
Bernanke, she has hardly spoken about her view on monetary
policy. Because the market doesn't seem to doubt she is a dove,
there's a chance she is not as dovish as expected," said Ichiro
Asai, economist at Daiwa Securities.
Sterling was 0.1 percent lower at $1.5887, having
struck a two-month low of $1.5854 on Tuesday after
lower-than-expected inflation reading.