* Dollar rises as U.S. yields touch fresh two year highs
* Fed minutes keep September tapering bets alive
* Dollar up more than 1 percent versus yen
* EZ PMIs buoy euro vs currencies other than dollar
By Anooja Debnath
LONDON, Aug 22 The dollar rose broadly on
Thursday, tracking gains in U.S. Treasury yields as the Federal
Reserve minutes kept alive prospects of a trimming of its
monetary stimulus in September.
The dollar was up 0.5 percent against a basket of
currencies at 81.638, after breaking through initial resistance
at 81.604, its 200 day moving average. It hit an intra-day high
of 81.719 which was a one-week peak.
The U.S. 10-year Treasury yield set a fresh two-year high of
2.936 percent on Thursday. Such a rise in yields can
increase the attractiveness of dollar-denominated assets.
The minutes for the Fed's July 30-31 meeting, released on
Wednesday, did little to alter expectations it could start
trimming its bond purchases as early as next month.
"The Fed minutes have probably just led markets to expect
more concretely that the central bank will begin tapering its
stimulus shortly," said Lee Hardman, currency economist at BTMU.
"The high U.S. yields are leading to tighter global
financial conditions which are leading to a repatriation of
funds back to the U.S. from developing markets which is helping
support dollar. In the near term the dollar looks very bullish."
The dollar was up more than 1 percent against the yen
at 98.70 yen, breaking past the Aug. 15 peak of 98.66 yen which
was acting as initial resistance.
The spread between U.S. ten-year Treasury yields
and equivalent Japanese (JGB) yields stood at highs
last seen in April 2011, favouring the dollar over the yen.
Marshall Gittler, head of global FX strategy at IronFX said
that markets seem to perceive "each day of tapering is a day
closer to the Fed raising rates." This would support the dollar
as "over the long term this should mean higher U.S. real
U.S. initial jobless claims data releasing at 1230 GMT will
be closely watched. Lower figures could point to a solid August
non-farm payrolls number due on Sept. 6, which would likely be a
trigger for the Fed to start winding down bond purchases, said
Against the buoyant U.S. dollar, the euro slipped 0.3
percent to $1.3310 on reported selling by real money accounts.
Chartists said support was at $1.3243, its May 1 high.
The euro had earlier pared losses against the dollar and
gained broadly against other currencies after preliminary
Purchasing Managers' Index data showed business activity across
the euro zone picked up more than expected this month, led by
But analysts remain bearish on the euro versus the dollar
given the interest rate differentials between the European
Central Bank and the Fed.
"The ECB is still very vague about its forward guidance,
just saying they are going to keep rates low for an extended
period whereas the Fed is quite clear about its tapering," said
Antje Praefcke, senior currency strategist at Commerzbank,
adding that her bank was bearish on the euro and expects it to
end the year at $1.27.
Although the euro struggled against the dollar, the PMI
figures were supportive of the single currency which was up 0.7
percent against the yen at 131.32 yen, 0.2 percent up
versus sterling at 85.48 pence and hit a near
three-year high versus the Norwegian crown of at