By Shinichi Saoshiro
TOKYO (Reuters) - The dollar hovered near a five-month high against a group of major currencies on Wednesday, as a surge in the benchmark 10-year Treasury yield above 3 percent reignited a rally that had lost steam last week.
The dollar index versus a basket of six major peers added 0.1 percent to 93.335 <.DXY> after rallying to 93.457 overnight, its highest since Dec. 22.
The greenback had gained with few interruptions since mid-April as easing tensions in the Korean Peninsula and moves by China and the United States to prevent a full-blown trade war allowed investors to focus on the yield advantage the United States enjoys over other countries.
The advance stalled last week after weaker-than-expected April U.S. inflation data, but regained traction overnight as strong U.S. consumer spending numbers sent long-term Treasury yields surging to a seven-year peak of 3.095 percent
The 10-year Treasury yield had hovered around 3 percent since reaching the threshold late last month on concerns about rising inflation and a ballooning federal budget gap. But until Tuesday, 3 percent level wasn't convincingly broken. [US/]
"The dollar stands to benefit, particularly against the euro, on higher Treasury yields. But against the yen, its advance could stall if the negative impact of higher yields on equities is prolonged," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
The yen tends to benefit during times of market turmoil and investor risk aversion.
"The next focal point is trying to figure out the yield levels which are bearable for equities," Ishikawa said.
The uptick in U.S. yields unnerved equity markets and sent Wall Street shares significantly lower on Tuesday. [.N]
The euro was 0.1 percent lower at $1.1823
The dollar was little changed at 110.300 yen
The yen barely budged after data showed Japan's economy contracted for the first time in nine quarters during January-March. [nT9N1DU04F]
The Australian dollar was largely flat at $0.7467
The pound was a shade weaker at $1.3499
(Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam)
This story has not been edited by Firstpost staff and is generated by auto-feed.
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Updated Date: May 16, 2018 07:05:06 IST