* Dollar/yen comes within reach of 112.00 threshold
* Mnuchin repeats support for ultra long-term bond issuance
* Euro holds ground before May 7 French vote
* RBA keeps rates at 1.5 pct as expected, Aussie little affected (Updates prices, adds details and quotes)
By Shinichi Saoshiro
TOKYO, May 2 (Reuters) - The dollar hit a one-month high against the yen on Tuesday, lifted by Treasury yields which surged after U.S. Treasury Secretary Steven Mnuchin commented on the possibility of ultra long-term bond issuance.
The greenback last traded at 111.900 yen after touching 111.985, its strongest since March 31.
The dollar was boosted as long-term Treasury yields soared to multi-week highs after Mnuchin reiterated his view in an interview with Bloomberg, saying the government issuing debt exceeding 30-years in maturity “can absolutely make sense.”
“The dollar is moving in tandem with Treasury yields, which saw its benchmark rise above the 2.3 percent threshold with Mnuchin seemingly very enthusiastic about issuing so-called ultra long-term bonds,” said Yukio Ishizaki, senior currency strategist at Daiwa Securities.
The jump in U.S. debt yields helped the dollar brush off negative pressure from downbeat data.
The latest U.S. economic indicators to be released remained underwhelming. A survey out on Monday showed factory activity slowed in April, while data showed consumer spending was unchanged in March, and an important inflation measure fell on a monthly basis for the first time since 2001.
Other U.S. data out later this week include an ADP employment report on Wednesday, durable goods orders on Thursday and a non-farm jobs report on Friday.
Despite the lacklustre data, the dollar has managed to rise due to expectations that the Federal Reserve would hike interest rates again soon, but it the indicators ramin weak investors could revise their expectations, said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.
“If this week’s remaining U.S. indicators continue to be weak, such expectations that have supported the dollar could crumble easily.”
The Federal Reserve is widely expected to keep interest rates unchanged at a two-day policy meeting that begins on Tuesday, and investors will look to see whether the central bank downlplays the recent soft patch in the economy to leave the door open for a rate increase in June.
The euro, meanwhile, held its ground against the dollar. The common currency was up 0.15 percent at $1.0914, adding to modest gains made overnight.
It was in reach of a 5-1/2-month high of $1.0951 scaled last week on relief after Emmanuel Macron’s victory against anti-euro nationalist Marine Le Pen in the first round of France’s presidential elections. The runoff vote is on May 7.
“The euro was initially expected to become volatile as the May 7 French vote neared, but it is still holding very firm. With French equities also at record highs, it appears that the market is treating Macron’s win as a foregone conclusion,” Ishizaki at Daiwa Securities said.
The euro touched a 1-1/2-month high of 122.200 yen , with the safe-haven Japanese currency broadly on the defensive amid a recent ebb in broader risk aversion.
U.S. President Donald Trump said on Monday he was open to meeting North Korean leader Kim Jong Un in the right circumstances.
The Australian dollar gained about 0.3 percent higher at $0.7548 thanks to a bounce in iron ore prices, and showed little reaction to the Reserve Bank of Australia keeping its policy rate unchanged at a record low 1.5 percent.
The RBA’s decision on Tuesday was expected.
The U.S. dollar index against a basket of major currencies was effectively flat at 99.050 after posting a small gain overnight. (Reporting by Shinichi Saoshiro; Editing by Simon Cameron-Moore)