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The latest move in a repricing of risk in the
bond market, which analysts are still struggling to explain, was
a move higher in longer-dated U.S. Treasury yields overnight,
and that should benefit the dollar.
But German Bund yields have risen by more and elsewhere there
was more positive housing data that helped the Australian dollar
higher. That all added up to a 0.4 percent fall in the dollar
index. The euro rose around 0.6 percent to $1.1220.
"My feeling is this is all broadly a shake out of positioning,"
Rabobank strategist Jane Foley said.
"The market had got itself very long dollars, very short euro
and very long bonds. There are some major positions being
readjusted and it may take some weeks or even months before we
get back on track."
There was little clarity in the euro's moves after Greece made
an early payment to the International Monetary Fund but offered
little sign a positive conclusion to its talks with euro zone
creditors was nearing.
The single currency fell in early trade in Asia before
recovering. More broadly, it has stalled since hitting its
highest levels in more than two months last week above $1.13.
"The political risk premium is certainly a factor there, and
it's quite volatile there with the markets going back and forth
with the negotiations," RBC Capital Markets' senior currency
strategist, Sue Trinh, said.
"We still like the euro directionally lower over the longer
term, as a mix of independent euro weakness combined with
independent U.S. dollar strength."
Against the yen, the dollar dipped less than 0.1 percent to
120.005 yen, well above its overnight low of 119.40 and solidly
within its ranges held since mid-March.
Both the Australian and New Zealand dollars have benefitted from
the bond market moves. The premium offered by two-year Australia
debt over its U.S. counterpart has widened to 152 basis
points, from as little as 112 basis points in March, and that of
two-year New Zealand debt has widened to 251 basis points,
from 247 basis points on Monday.
The Aussie rose 0.7 percent to $0.7943. The kiwi gained half
percent to $0.7369.
(Additional reporting by Lisa Twaronite in Tokyo; Editing by
Louise Ireland)
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