June 10, 2020 / 2:12 PM / a month ago

FOREX-Dollar slumps to three-month lows on Fed easing speculation

    * Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E
    * Euro and pound at 3-month highs against the dollar
    * Fed meets as traders eye Treasury yields
    * Speculation on yield control measures  

 (Adds new comment, FX table, U.S. data, updates prices, changes byline, dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, June 10 (Reuters) - The dollar dropped to a three-month low on Wednesday as speculation
increased that the U.S. Federal Reserve will announce later in the session it intends to keep the recent
rise in bond yields in check.
    Concern about possible measures or even a simple statement of intent by the Fed to hold down the
yields of U.S. government bonds has kept the U.S. currency under pressure.
    Some investors believe the Fed, which is not expected to change its interest rate policy, may decide
either today or at a later date to adopt yield-curve control measures to guide 10-year Treasury yields
lower.
    "The Fed is definitely considering it. They will definitely say they are considering all options to
meet their objectives," said John Floyd, principal portfolio manager for the dynamic macro currency
strategy at Record Currency Management in New York.
    "But I don't think they will announce explicit targets. There is really no incentive to do that as the
economy is just reopening and the U.S. employment data is stronger than expected," he added.
    Earlier this month, hopes that the U.S. economy would recover faster than expected had pushed yields
of U.S. government bonds to their highest level in nearly three months and strengthened the dollar.
    In mid-morning trading, the dollar fell about 0.4% against a basket of major currencies to 96.061
, after earlier sliding to 95.973 a level not seen since March 12. 
    The euro, the pound and the Swiss franc all reached three-month highs
against the dollar.     
    The euro rose as high as $1.1389, sterling reached $1.2803 and the Swiss franc $0.9514. 
    The dollar also fell against the yen to a two-week low of 107.26, and was last down 0.4% at
107.32 yen.
    The greenback though reacted little after data showed U.S. consumer prices fell for a third straight
month in May, with the index dipping 0.1% after plunging 0.8% in April.
    In the meantime, the uncertainty about the outcome of the Fed meeting is likely to keep the dollar
under pressure.
    U.S. central bankers on Wednesday will also publish their first economic projections since the
coronavirus pandemic plunged the country into recession.
    Estimates are expected to signal a collapse in output this year and near-zero interest rates for the
next few years.      
    In other currencies, the Australian and New Zealand dollars resumed their recent rally against the
U.S. dollar, as economic activity in both countries was restored following the lifting of coronavirus
restrictions.
    The Australian dollar rose 0.5% to US$0.6996, not far from an 11-month high. The New Zealand
dollar also rose 0.3% to US$0.6532.
    
    ========================================================
    Currency bid prices at 9:47AM (1347 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1361        $1.1340     +0.19%         +1.35%      +1.1389     +1.1332
 Dollar/Yen       JPY=        107.2800       107.7200    -0.41%         -1.45%      +107.8700   +107.2700
 Euro/Yen         EURJPY=     121.89         122.15      -0.21%         -0.05%      +122.3600   +121.8100
 Dollar/Swiss     CHF=        0.9456         0.9506      -0.53%         -2.29%      +0.9514     +0.9451
 Sterling/Dollar  GBP=        1.2743         1.2729      +0.11%         -3.89%      +1.2800     +1.2707
 Dollar/Canadian  CAD=        1.3408         1.3414      -0.04%         +3.25%      +1.3428     +1.3370
 Australian/Doll  AUD=        0.6998         0.6961      +0.53%         -0.33%      +0.7019     +0.6933
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0744         1.0781      -0.34%         -1.00%      +1.0790     +1.0744
 Euro/Sterling    EURGBP=     0.8913         0.8908      +0.06%         +5.43%      +0.8920     +0.8884
 NZ               NZD=        0.6531         0.6512      +0.29%         -3.04%      +0.6560     +0.6496
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        9.3231         9.2639      +0.64%         +6.20%      +9.3262     +9.2000
 Euro/Norway      EURNOK=     10.5958        10.5180     +0.74%         +7.70%      +10.6030    +10.4550
 Dollar/Sweden    SEK=        9.2295         9.1716      +0.46%         -1.26%      +9.2304     +9.1601
 Euro/Sweden      EURSEK=     10.4867        10.4382     +0.46%         +0.17%      +10.4915    +10.4096
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Julien Ponthus in London; Editing by
Andrea Ricci)
  
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