SINGAPORE/TOKYO, May 19 (Reuters) - The dollar held firm on
Tuesday in the wake of a rise in U.S. bond yields and as the
euro came under renewed pressure on persistent worries that
Greece may miss debt repayments next month.
The dollar last traded at 94.205 versus a basket of
six major currencies, having touched a high of 94.336 at one
point during the session, its highest level in nearly a week.
The dollar index had gained about one percent on Monday to
pull away from a four-month low of 93.133 hit last Thursday.
The main catalyst for the dollar's rebound was a rise in
U.S. debt yields. The 10-year U.S. Treasuries yield held steady
at 2.228 percent, after rising 9 basis points on
Monday.
U.S. debt yields had risen in overnight trade despite weak
U.S. housing data, which showed sentiment among U.S.
homebuilders slipped in May even as economists had forecast a
small improvement.
However, there was still some caution about the near-term
outlook for the dollar, given the recent run of disappointing
U.S. economic data.
"To give it more legs you do need to see some real evidence
that the growth trajectory into the second quarter has gained
momentum," said Mitul Kotecha, head of Asia-Pacific FX strategy
for Barclays (LSE: BARC.L - news) in Singapore.
The euro slipped 0.1 percent to $1.1303, edging away
from a three-month high of $1.1468 set on Friday. Renewed
concerns over Greece's ability to repay its debts weighed on the
common currency.
Investors dumped Greek bonds on Monday as Athens and its
creditors made slow progress in bridging gaps on a range of
issues.
In a leaked internal memo, first disclosed by Britain's
Channel 4 on Saturday (Shenzhen: 002291.SZ - news) , the International Monetary Fund
acknowledged Greece had little chance of making a payment due on
June 5 and said it would not be pushed into a "quick and dirty"
review to disburse further bailout funds to Athens.
Still, the common currency could rise further as many
investors are stuck with euro short positions, said Junya
Tanase, chief FX strategist at JPMorgan Chase Bank in Tokyo.
"There still remains a massive amount of euro short
positions. The euro also looked undervalued in terms of yield
gaps between the euro and the dollar. The euro could be bought
back and the dollar's rebound may prove to be a temporary one,"
he said.
Against the yen, the dollar held steady at 119.95 yen
, having pulled up from last week's low of 118.885.
The New Zealand dollar rose 0.5 percent to $0.7426
after a central bank survey showed a pick-up in inflation
expectations, cooling some speculation of a possible cut in
interest rates in coming months.
The kiwi's bounce helped the Australian dollar recoup losses
suffered after the Reserve Bank of Australia signalled it was
open to further interest rate cuts if needed.
Australian dollar edged up 0.1 percent to $0.7995,
having recovered from an intraday low of $0.7956.
(Additional reporting by Naomi Tajitsu in Wellington and Cecile
Lefort in Sydney; Editing by Shri Navaratnam)
By Masayuki Kitano and Hideyuki Sano
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