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* Dollar benefiting from rise in U.S. yields this week
* ECB rate decision on Thursday overhangs market
* Slowdown in euro zone inflation seals case for ECB action
By Michael Connor
NEW YORK, June 4 The U.S. dollar got a lift on
Wednesday from rising Treasury rates and touched a monthly high
against the yen before losing some steam on weaker-than-expected
U.S. private-sector jobs numbers.
The dollar last stood at 102.57 yen after trading as
high as 102.79 yen, near a level last touched on May 5. The U.S.
dollar index, composed of six major currency pairs, was
last up 0.09 percent at 80.625 after peaking at 80.677.
The dollar's early gains against the euro and other
currencies were trimmed by the ADP National Employment Report,
according to currency strategist Martin Schwerdtfeger at TD
Securities in Toronto.
Private employers added 179,000 jobs to their payrolls in
May, ADP data showed. That compared with 215,000 jobs in April
and was below economists' expectations for a gain of 210,000
jobs in May in the government's comprehensive employment report
due on Friday.
The ADP report does not have a good record predicting
nonfarm payrolls, data that often shakes global currency
markets, and it would have no lasting effect on trading,
"The market will be a little bit cautious to adopt any
strong view," he said.
Longer-dated U.S. Treasury yields have risen 20 basis points
in the past week and the spread between two-year German and U.S.
government bonds - the most directly responsive to interest rate
moves - is within a whisker of its highest since mid-2007.
The benchmark 10-year U.S. Treasury note was
down 5/32, the yield at 2.6094 percent.
Expectations the European Central Bank will take action on
Thursday to support growth are hanging over the market, as such
a move would put returns on euros in negative territory.
That has caused the euro to bounce around in recent days,
but the week's dominant trend is for a stronger dollar.
Disappointment over the pace of U.S. economic growth in the
first quarter meant the dollar defied views of banks and
investment houses at the start of 2014 for a surge in its value.
But expectations that the ECB will ease policy have
reinforced the base case for a stronger U.S. currency, and that
returns on U.S. government debt will rise while those in the
euro area fall.
The euro, which had been flirting with a $1.40 as recently
as May 8, was off 0.08 percent against the dollar at $1.3615.
Sterling was flat at $1.6750.
(Reporting by Michael Connor in New York; Editing by Dan