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Dollar licks wounds after drop to 7-week trough amid lower U.S. yields

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TOKYO — The dollar languished on

Wednesday, hovering just above a seven-week low with subdued

U.S. bond yields reducing the currency’s yield appeal.

The safe-haven greenback got some respite from a pullback in

world stocks from record highs as flare ups in coronavirus

infections from India to Canada soured the outlook for a quick

global recovery.

The safety bid also bolstered the yen, which

climbed to a fresh seven-week peak of 107.88 per dollar on

Wednesday.

The dollar index, which tracks the U.S. currency

against six major peers, was at 91.196 early in the Asian

trading day after slumping as low as 90.856 on Tuesday for the

first time since March 3. It has declined 2.2% so far this

month.

The index “has broken down through a key short-term support

level at 91.30 and can see further downside to the low 90s,”

with the euro rising to around $1.22, Westpac strategists wrote

in a client note.

“We were looking for the (index) to top in Q3, when second

derivative U.S. rebound measures crest and Europe gets her vax

act together, but the early indications are that vaccinations

across Europe are picking up pace already,” Westpac said.

The single currency traded at $1.2039, after touching a

seven-week high of $1.2079 overnight.

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The European Central Bank decides policy on Thursday, with

the Federal Reserve following next week.

The benchmark 10-year Treasury yield was around

1.56%, not far from its lowest since mid-March, as it continued

to consolidate following its retreat from the 14-month high at

1.7760% reached at the end of last month.

Declines in U.S. yields and the dollar in April have come as

evidence mounted that the Fed would be slower in tightening

monetary policy than it had appeared to the market, analysts

said.

Some encouragement for the euro came from the announcement

that the European Union has secured an additional 100 million

doses of the COVID-19 vaccine produced by BioNTech

and Pfizer.

Elsewhere though, pandemic developments triggered investor

caution.

India reported 1,761 deaths from COVID-19, its highest daily

toll, while Canada and the United States extended a land-border

closure for non-essential travelers.

On Wall Street, travel stocks weighed on sentiment, with

airline and cruise operators falling sharply.

Oil fell, dragging commodity-linked currencies lower

overnight.

The Canadian dollar traded at C$1.26050 to the

greenback in Asia, following its biggest plunge in nearly two

months on Tuesday. The Bank of Canada is due to announce a

policy decision later Wednesday.

The Australian dollar, a barometer for risk appetite, edged

higher to $0.77335 after sliding 0.4% overnight.

In cryptocurrencies, bitcoin traded around

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$56,000, consolidating following its dip to as low as $51,541.16

on Sunday. It set a record high at $64,895.22 on April 14.

========================================================

Currency bid prices at 056 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.2036 $1.2036 +0.00% -1.49% +1.2044 +1.2031

Dollar/Yen 108.0650 108.0950 -0.01% +4.64% +108.1270 +107.8800

Euro/Yen

Dollar/Swiss 0.9160 0.9159 +0.02% +3.55% +0.9161 +0.9154

Sterling/Dollar 1.3936 1.3938 +0.02% +2.04% +1.3946 +1.3934

Dollar/Canadian 1.2608 1.2612 -0.05% -1.01% +1.2615 +1.2603

Aussie/Dollar 0.7725 0.7725 +0.02% +0.44% +0.7735 +0.7721

NZ 0.7173 0.7170 +0.07% -0.08% +0.7180 +0.7164

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Kevin Buckland; Editing by Sam Holmes)

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