* Euro skids across the board, ECB action fuels fund flows
* Dollar, Treasury yields lifted by run of better US data
* Asian shares consolidate recent gains
By Wayne Cole
SYDNEY, June 11 The euro came under mounting
pressure on Wednesday as the European Central Bank's embrace of
negative interest rates encouraged flows out of the zone, while
Asian shares consolidated near recent highs.
The single currency was slipping across the board as
investors looked to borrow euros at super-low rates and buy
higher-yielding assets abroad, the so-called carry trade.
In contrast the dollar found support in a run of improving
U.S. economic data which pushed up Treasury yields and stoked
speculation the Federal Reserve might sound less dovish on
policy when it meets next week.
That diverging outlooks shoved the euro down to $1.3524
and further away from a $1.3668 peak scored at the start
of the week.
It also hit a seven-month trough on the higher-yielding
Australian dollar and to near its lowest against the
pound since late 2007.
Action in equity markets was more muted with many indices
already having come a long way. MSCI's broadest index of
Asia-Pacific shares outside Japan dipped 0.2
percent from a three-year peak.
The MSCI index of emerging markets has also been
on a roll to reach its highest since May 2013, in part on
speculation the ECB's increasingly aggressive easing will
encourage fund flows to the emerging world.
Japan's Nikkei edged up 0.3 percent aided by MSCI's
decision to remove South Korea and Taiwan indexes from its
review list for reclassification to developed markets, keeping
them in the emerging markets classification.
There had been speculation Tokyo equities would take the
brunt of rebalancing if Korean and Taiwanese shares were
reclassified to developed markets.
Moves had been minor on Wall Street with the Dow up
0.02 percent, while the S&P 500 down 0.02 percent and the
Nasdaq Composite 0.04 percent firmer.
The flow of U.S. data has been bright enough to soothe
worries over the economy after a disappointing first quarter.
Tuesday's releases showed small business confidence and job
openings reaching heights not seen since 2007.
That in turn has led the futures market <0#FF:> to nudge
forward the likely timing for a first rate hike from the Federal
Reserve, though that is still well into 2015.
Likewise, U.S. Treasury yields have reversed decisively
higher with 10-year paper paying 2.646 percent compared to a
trough of 2.402 percent just two weeks ago.
"The bull moves in bonds that began early this year are now
officially over," said William O'Donnell Treasury strategist at
RBS Markets. "As such, I still expect cash 10-years to trade at
2.80 percent over the coming month."
The prospect of higher yields has offered some support to
the U.S. dollar and it firmed to 80.880 against a basket
of currencies, a long way from May's low of 78.906.
Still, the broader moves in currencies were more about euro
weakness than dollar strength as the single currency came under
increasing pressure in the wake of the ECB's easing.
The adoption of negative deposit rates by the ECB has
sparked talk reserve managers at other central banks were
trimming their euro holdings, and that the very low yields
offered by peripheral euro zone debt was finally discouraging
demand for the paper.
In commodities, gold was firm at $1,261.70 an ounce
as a breakdown in strike talks in South Africa buoyed palladium
Brent oil gained 23 cents to $109.75 a barrel, while
U.S. crude prices added 11 cents to $104.46.
(Editing by Shri Navaratnam)