* Dollar index slips, euro regains $1.04
* Spanish, Italian banks weigh on Europe shares, Asia up
* Wall Street seen opening lower
* Oil up on expected fall in U.S. inventories
By Nigel Stephenson
LONDON, Dec 21 The dollar eased from 14-year
highs on Wednesday, giving back some of the gains chalked up
since Donald Trump's U.S. election victory, while concerns over
banks pulled European shares lower.
Wall Street also looked set to open lower, according to
index futures, after the Dow Jones industrial average climbed to
within 25 points of the 20,000 mark on Tuesday.
A widespread conviction that Trump's policies will boost the
U.S. economy has powered the dollar and Treasury yields since
the Nov. 8 election pushed U.S. stocks to record highs.
Some investors seemed ready to cash in the gains in thin
pre-Christmas trade, driving a 0.4 percent fall in the dollar
index, which measures the greenback against a basket of
major currencies. This had risen 5 percent this year and reached
a 14-year peak on Tuesday.
U.S. 10-year Treasury yields, which hit their highest in
more than two years last week after the Federal Reserve raised
interest rates and forecast more hikes than most investors had
expected, fell 1.3 basis point to 2.56 percent.
Benchmark 10-year yields have risen almost 80 bps since
The euro, which touched a 14-year low on Tuesday, rose 0.4
percent to $1.0430 while the yen gained 0.6
percent to 117.10 per dollar.
Many analysts still see the dollar rising further, possibly
to parity with the euro.
"The euro is in a fight between short-covering pressure and
political angst. Economics doesn't come into it at all. If Dow
20,000 is just a number but a magnet all the same, euro parity
with the dollar will be every bit as magnetic," said Kit Juckes
at Societe Generale.
"We'll get there and get over-excited before too long."
The Swedish crown rose 0.7 percent, its biggest one day rise
in six months to a two-month high of 9.6350 to the euro
after the Riksbank kept interest rates on hold and
expanded its asset-buying programme.
European shares fell. The pan-European STOXX 600 index
dipped 0.4 percent, having hit an 11-month high on
Tuesday, led lower by banking shares.
Italy's Monte dei Paschi di Siena, which must raise 5
billion euros by the end of the month to avoid state
intervention, was once again in focus. Its shares
dropped 17 percent at one point, before briefly turning positive
after lawmakers approved a 20 billion euro plan to prop up the
country's weak banks.
Spanish lenders also fell after the European Court of
Justice overturned a Spanish court ruling that limited the
banks' liabilities for so-called floor clauses in mortgage
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
MSCI's broadest index of Asia-Pacific shares outside Japan
inched up 0.1 percent after a string of losses.
Tokyo's Nikkei share average also fell, pulling back
from earlier one-year highs to close down 0.3 percent.
In euro zone debt markets, German 10-year government bond
yields fell 1 bps to 0.25 percent. Among
lower-rated bonds, Spanish 10-year yields fell to
five-week lows and Italian equivalents also fell on concerns
The premium over Spain that Italy would pay to borrow in
bond markets briefly topped 50 bps for the first
time since just after a Dec. 4 referendum on constitutional
reform triggered Italian premier Matteo Renzi's resignation.
Oil prices rose on expectations of a fall in U.S. crude
inventories. Brent crude, the international benchmark, rose 0.2
percent to $55.55 a barrel.
Gold edged up 0.3 percent to $1,134 an ounce as the
"With what we're seeing in the dollar at the moment, there
is no real driver to push gold lower," ABN Amro analyst
Georgette Boele said.
(Additional reporting by Wayne Cole in Sydney, Jamie McGeever,
John Geddie and Jan Harvey in London; Editing by Mark Trevelyan
and Alexander Smith)