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US dollar eases vs yen as Treasury yields come off highs, Fed awaited
[TOKYO] The US dollar eased against the yen on Tuesday, coming off a 10-month high, as a surge in Treasury yields was tempered for the time being.
The US currency was also capped by the prevailing wait-and-see mood ahead of the Federal Reserve's two-day policy meeting starting later in the day.
The US dollar was down 0.2 per cent at 114.850 yen.
It climbed overnight to as far as 116.120 on Monday, its highest since early February as the benchmark 10-year Treasury yield popped above the 2.5 per cent threshold to a level unseen since September 2014 as oil rallied. The greenback, however, retraced its gains as Treasury yields ended Thursday significantly below their peaks.
The euro was marginally higher at US$1.0640. The common currency had gained 0.7 per cent overnight, helped by higher German bund yields and on relief as Rome was seen ready bail out Italian bank Monte dei Paschi di Siena.
"The US dollar will continue to have 120 yen in its sights. But a 25 basis points rate hike by the Fed is also significantly priced in, and the US dollar is likely to be locked in between trend following bulls and profit-takers," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
Fed fund futures show a 97 per cent probability that the Fed will lift rates by a quarter of a percentage point, according to the CME Group.
Moreover, the markets will be eager to know if the US election resulting in Donald Trump's victory has reshaped the central bank's growth and inflation outlook.
Elsewhere, the gain in crude oil prices buoyed commodity-linked currencies.
The Canadian dollar was little changed at C$1.3128 per US US dollar following an overnight rise to a 2-month peak of C$1.3110.
The Australian dollar was steady at US$0.7496 after adding 0.6 per cent the previous day.
Oil rose to an 18-month high on Monday after Opec and some non-members reached their first deal since 2001 to jointly reduce output to tackle global oversupply.