Dollar climbs as risk appetite fades, after Yellen's comments on rates
* Treasury's Yellen says U.S. interest rates may need to rise
* Commodity currencies slump against the dollar
* Ethereum hits yet another record high
* Graphic: World FX rates Link
By Gertrude Chavez-Dreyfuss
NEW YORK, May 4 (Reuters) - The dollar rose to a two-week high on Tuesday, partially unwinding a monthlong decline, as risk appetite faded with a sell-off in stocks and a rally in Treasuries, and after U.S. Treasury Secretary Janet Yellen said interest rates may need to rise to prevent the American economy from overheating.
Yellen, in prepared remarks on Tuesday, made the comment as more of U.S. President Joe Biden's economic investment programs come on line. She did say the additional spending was small compared to the relative size of the economy.
The dollar's safe-haven appeal received a further boost as the Nasdaq fell more than 2% .IXIC , the S&P more than 1% .SPX and the Dow Jones Industrial Average a less steep 0.69% .DJI , and as Treasury yields declined.
Analysts said much of the good news has likely been priced in by the market.
"After improving dramatically through the first quarter, U.S. economic expectations have converged with reality, meaning that surprises are no longer skewed toward the positive," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
"For many investors and momentum traders, some rebalancing - away from risk-sensitive currencies and toward havens - is making a lot of sense at this juncture," he added.
Tuesday's bounce reversed losses sustained on Monday after a disappointing U.S. manufacturing survey report, leaving the dollar 1% above a one-month low struck last week.
The dollar index =USD , which measures the dollar's value against a basket of other major currencies, climbed 0.4% to 91.34, just shy of a near two-week high. It fell more than 2% in April.
"There is no consensus right now on what will happen to the dollar for the rest of the year as there was at the start," Tempus Inc said in its latest research note.
"While some traders see the U.S. dollar with room to grow because of bond yields going higher in the future as inflation expectations grow, others believe the buck is now overvalued and will only keep dwindling as the rest of the world successfully plays catch-up."
Most of the dollar's gains were notched against the antipodean currencies, chiefly the Australian dollar AUD=D3 , even though commodity prices were generally firmer across the board.
The greenback advanced roughly 1% versus the Aussie and New Zealand dollars NZD=D3 .
The euro fell 0.4% against the dollar to $1.2016 EUR=EBS . Against the yen, the dollar rose 0.2% to 109.32 yen JPY=EBS .
Sterling GBP=D3 dipped 0.1% to $1.3881 ahead of a Bank of England meeting on Thursday, which may announce a slowdown in its bond buying program as the vaccine rollout bolsters Britain's economy.
Elsewhere, cryptocurrency ethereum ETH=BTSP powered to another record peak of $3,530 as speculators drive white-hot crypto markets higher. It was last down 6.3% at $3,213.
Currency bid prices at 12:29PM (1629 GMT) Description
U.S. Close Pct Change
+109.4800 +109.0450 Euro/Yen
+131.6300 +131.1600 Dollar/Swiss
+0.9115 Sterling/Dollar GBP=D3
+$1.3840 Dollar/Canadian CAD=D3
World FX rates Link
USD positions Link
Reporting by Gertrude Chavez-Dreyfuss: Additional reporting by Saikat Chatterjee in London; Editing by
Kirsten Donovan and Jonathan Oatis
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