* Dlr/yen up from near 10-wk lows, capped before US-Japan
* Treasury yields pinned near multi-week lows, limits dollar
* Kiwi hit after RBNZ says tightening could be at least 2
(Updates prices, adds details and quotes)
By Shinichi Saoshiro
TOKYO, Feb 9 The dollar managed to stabilise on
Thursday after the previous session's slide, although lingering
risk aversion pinned Treasury yields near multi-week lows and
restrained the greenback's bounce.
The euro was down 0.1 percent at $1.0678, edging back
towards a one-week low of $1.0640 reached on Wednesday on
heightened European political woes.
The dollar rose 0.3 percent to 112.265 yen after
nearing a 10-week low of 111.590 the previous day. The greenback
was hit as Treasury yields slid sharply overnight.
The dollar index against a basket of major currencies was up
0.1 percent at 100.370.
The index rose to a 14-year high of 103.820 in January on
hopes of large fiscal spending and other pro-growth policies
under U.S. President Donald Trump. But it has dropped since of
late on Trump's protectionist trade rhetoric and perceived
support for a weaker dollar.
"We are now in a phase where downside risks to the dollar
has become predominant, with the drop in Treasury yields having
gained further momentum this week due to perceived European
political risks," said Junichi Ishikawa, senior forex strategist
at IG Securities in Tokyo.
Treasury yields were stuck near a multiple-week low set on
Buying of U.S. Treasuries gathered steam this week as
expectations for a March interest rate hike by the Federal
Reserve have waned.
Uncertainty about European politics has also boosted
Treasuries. Recent polls have shown German Chancellor Angela
Merkel falling behind a candidate from the country's Social
Democrats in this year's elections. Polls have also suggested
France's Marine Le Pen, who has championed pulling the country
out of the European Union, is gaining ground.
Knocked by the slide in U.S. yields, the dollar has also
come under pressure against the safe-haven Japanese yen in the
wake of geopolitical concerns.
The yen could be poised for further gains should Trump
reiterate his opposition to a strong dollar when he meets
Japanese Prime Minister Shinzo Abe at a two-day summit starting
"Trump may opt to take a tough stance against Japan amid the
perceived political chaos. Taking such a stance would also set
him up to talk tough with China," Ishikawa at IG Securities
Trump and his top trade adviser Peter Navarro criticised
Germany, Japan and China last week, saying the trading partners
were engaged in devaluing their currencies to the disadvantage
of the United States.
The currency market also kept a wary eye on gyrations in the
Japanese government bond market, where yields climbed to
one-year highs last week before the Bank of Japan arrested the
rise by conducting a series of debt-buying operations.
The dollar gained steadily against the yen last year on
expectations that U.S.-Japanese interest rate differentials
would widen. Last week's rise in Japanese yields dented the
dollar by challenging this dynamic.
"The recent fluctuations in JGBs have added to the currency
market's list of concerns. It was a little unexpected as few
thought JGBs would play such a role," said Masashi Murata,
senior strategist at Brown Brothers Harriman.
"But while such risk events may lead to yen buying, it is
unlikely to constitute a long-term trend as we have to keep in
mind that the global economy is expanding steadily."
The New Zealand dollar was down 0.8 percent at $0.7201
, pulling away from a three-month high of $0.7375 hit
earlier this week.
The kiwi fell after the Reserve Bank of New Zealand (RBNZ)
kept rates at a record low of 1.75 percent on Thursday, as
expected, and said that any tightening in policy might be at
least two years away.
The Australian dollar suffered collateral damage and last
traded at $0.7615, down 0.4 percent on the day.
(Editing by Jacqueline Wong & Shri Navaratnam)