* Euro steadies near $1.15 after Treasury yields fall from
highs

* Sterling extends gains in Brexit deal optimism

* Norwegian crown the big riser after inflation data

* Graphic: World FX rates in 2018 (Adds details, quotes, updates prices)

By Tommy Wilkes

LONDON, Oct 10 (Reuters) – The euro steadied on Wednesday
near $1.15, moving away from seven-week lows after a fall in
U.S. Treasury yields took some steam out of the dollar’s recent
run.

Rising Treasury yields and concern about the sustainability
of Italy’s public finances have fuelled another rally in the
dollar in recent sessions, sending the greenback to a 1
1/2-month high on Tuesday.

That rally paused in European trading on Wednesday, although
analysts said it was likely to prove a temporary reprieve for
the euro.

Investors are betting that rising inflation pressures will
keep the Federal Reserve, which unlike the European Central Bank
is hiking rates, firmly focused on tighter policy, even as U.S.
President Donald Trump took aim at policy makers’ hawkish
inclinations.

"If U.S. yields rise at the same time and the market prices
in a slightly more aggressive Fed next year, that automatically
means that EUR/USD will head south," Commerzbank analyst Antje
Praefcke said.

"That means that short-term the dollar will continue to
remain bid. The euro has lost its shine and therefore has too
little to offer at present."

On Wednesday, the dollar index was largely unchanged
at 95.713, not far off 96.163 reached during the previous
session — its highest level since Aug. 20.

The euro hovered around $1.1497 having briefly pushed
past $1.15 in Asian trading hours.

Yields on Italy’s 10-year bonds have hit a 4 1/2-year high
this week – reflecting concern about the country’s finances. Italian Economy Minister Giovanni Tria reiterated on
Wednesday that the government would do everything in its power
to regain the confidence of financial markets. European shares fell with investors in a nervous mood.
Markets have been buffeted by worries about the impact of the
U.S.-China trade conflict on economic growth, and rising U.S.
funding costs.

"A short-term risk rebound should be faded and used to get
back into JPY longs as rising bond yields will sooner or later
collide with the outlook for risky assets," Morgan Stanley
analysts said in a note.

The Japanese yen is traditionally viewed as a safe-haven
currency but has performed badly versus the U.S. currency
recently and remains near 11-month lows.

Against the yen , the dollar edged higher, trading up
0.2 percent at 113.20 yen.

With risk sentiment souring, currencies deemed a play on the
global economy underperformed. The Australian dollar was
stuck at $0.7106, not far from its weakest since February 2016.

Sterling hit a 3 1/2-month high versus the euro after reports that Britain and the EU were making progress
towards a Brexit deal. Yields on the benchmark 10-year Treasury bond stood at 3.22 percent on Wednesday, after reaching a seven-year
top of 3.261 percent overnight.

China’s offshore yuan gave up 0.2 percent to 6.9274
yuan per dollar, not far from the 6.9379 two-month lows touched
at the start of this week.

A Reuters poll released Wednesday showed China’s onshore
yuan is forecast to pare some of its recent losses against the
dollar over the coming year on hopes that risks from the
U.S.-China trade war and a sell-off in emerging markets will
subside.

The Norwegian crown gained 0.7 percent against the dollar to 8.2130 crowns, and 0.6 percent versus the euro to
9.4435 crowns, after Norway’s inflation rate rose more than
expected in September.

(Editing by Angus MacSwan)

Let’s block ads! (Why?)


Source link