Dollar reverses losses, shows modest gain following 10-year TIPS auction
* Treasury yields inch lower
* Jobless claims, home sales data disappoint
* Dollar reverses losses following soft TIPS auction (Updates prices)
By Stephen Culp
NEW YORK, Jan 20 (Reuters) - The dollar fluctuated but remained rangebound on Thursday as this week's upward trajectory of U.S. Treasury yields took a breather.
While the dollar initially edged lower following the release of disappointing economic data, the greenback reversed its losses after benchmark Treasury yields partially recovered in the wake of a 10-year TIPS auction which showed soft foreign demand for the notes.
Against a basket of world currencies, the dollar was last up 0.13% =USD .
U.S. 10-year note yields US10YT=RR were at 1.8325%, off their two-year high of 1.902% reached on Wednesday.
"While yields are softer, they’re still at elevated levels, and the dollar continues to draw support ahead of next week’s Fed meeting," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "We’ve seen ebbs and flows this month, but the underlying fundamentals remain bullish for the dollar on the view that the Fed is going to adopt a more hawkish policy stance going forward."
The benchmark yield's advance has been driven by market expectations that the U.S. Federal reserve will tighten monetary policy at a faster pace than previously anticipated. Fed funds futures 0#FF: have fully priced in a rate hike in March and a total of four in 2022.
The central bank's Federal Open Markets Committee (FOMC) is expected to convene its two-day monetary policy meeting on Tuesday, at the conclusion of which market participants will closely parse the committee's statement regarding the tightening timeline.
"Currencies are sticking to the range, waiting on central banks next week," Manimbo said, adding that "market expectations have arguably become overly aggressive with respect to hawkish Fed policy."
The Euro EUR=EBS was last at $1.1313, below an earlier high of $1.1369.
The pound GBP=D3 was 0.03% higher at $1.3615 and the yen JPY=D3 was nominally lower at 114.14 per dollar.
The Aussie AUD=D3 firmed 0.41% to $0.7241, extending advances from the previous day, and the Canadian dollar CAD=D3 reversed earlier gains, with one U.S. dollar worth C$1.2474.
The Norwegian crown fell after the central bank voted to keep interest rates on hold at 0.5% and said it was on track for an interest rate hike in March.
The crown was last down 0.16% against the dollar NOK=D3 .
Among cryptocurrencies, bitcoin BTC=BTSP was most recently up 3.0% at $42,916, while smaller rival ether ETH=BTSP gained 4.3% to $3,215.
Currency bid prices at 2:54PM (1954 GMT) Description
U.S. Close Pct Change
+114.5400 +113.9800 Euro/Yen
+130.0800 +129.1300 Dollar/Swiss
+0.9141 Sterling/Dollar GBP=D3
+$1.3599 Dollar/Canadian CAD=D3
World FX rates Link
Reporting by Stephen Culp; additional reporting by Tommy
Wilkes; editing by Jonathan Oatis
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