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FOREX-Dollar inches higher, supported by US bond yields – Reuters

* Dollar index trades above previous day’s 1-1/2 week low* Previous day’s rise in U.S. 10-year yield supports dollar* U.S. retail sales data coming up later on TuesdayBy Masayuki KitanoSINGAPORE, May 15 (Reuters) – The dollar inched higheragainst a basket of currencies on Tuesday, having pulled up fromits lowest level in more than a week as hopes for easing globaltrade tensions pushed U.S. bond yields higher.The dollar’s index versus a basket of six major peers rose0.1 percent to 92.638, inching away from a trough of92.243 set on Monday, which was the lowest for the dollar indexsince May 2.The benchmark 10-year U.S. Treasury yield was steady inAsian trading on Tuesday at 2.999 percent, afterrising 2 basis points on Monday.The U.S. 10-year bond yield had edged higher on Monday, astrade tensions eased in the wake of U.S. President DonaldTrump’s pledge to help Chinese telecommunications company ZTECorp, which has been penalised for violating U.S. sanctions withIran.The dollar index had scaled a four-month high of 93.416 lastweek, as a rise in U.S. Treasury yields highlighted the wideinterest rate gap between the United States and some otherdeveloped economies, and bolstered the dollar’s appeal.Although the dollar’s rally has lost steam after soft AprilU.S. consumer price data released last week raised doubts as towhether the U.S. Federal Reserve would raise interest rates asmany as four times in 2018, some traders remain upbeat about itsnear-term outlook.Stephen Innes, head of trading in Asia-Pacific for Oanda inSingapore, said he is comfortable remaining long U.S. dollar,with interest rate differentials still likely to work in thegreenback’s favour."The only thing I can really see right now is the…interestrate differential," Innes said.Innes added that he would probably stay with his dollarpositive view until there is either a wave of positive economicdata from countries other than the United States, or until theEuropean Central Bank starts to sound "overtly hawkish insteadof just tentatively".The euro edged up 0.1 percent to $1.1934, butremained below Monday’s high of $1.1996, which was the commoncurrency’s highest level since May 3.The euro had strengthened on Monday after European CentralBank policymaker Francois Villeroy de Galhau said that the ECBcould give fresh guidance on the timing of its first rate hikeas the end of its exceptional bond purchases approaches.Despite the dollar’s recent rally, some analysts remainsceptical about the chances of a sustained push higher in thegreenback.Growing worries about the U.S. budget deficit, which isprojected to balloon to more than $1 trillion in 2019 due to agovernment spending splurge and large corporate tax cuts, havedimmed the outlook for the greenback, along with concerns aboutthe country’s current account deficit.Against the yen, the dollar rose 0.1 percent to 109.74 yen. The greenback faces resistance on technical charts atlevels around 110.00 yen, having set a three-month high of110.05 yen in early May.Investors are focused this week on speeches by Fedofficials, as well as economic indicators such as U.S. retailsales data due later on Tuesday.(Reporting by Masayuki KitanoAdditional reporting by Karen Brettell in New York; Editing bySam Holmes)

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