October 9, 2018 / 2:47 PM / 7 months ago

FOREX-Dollar touches 7-week high, Italy worries weigh on euro

    * Longer-dated U.S. Treasury yields hit multi-year highs
    * IMF cuts world growth forecasts on tariffs, EM strain
    * Yuan stabilizes near seven-week lows amid liquidity
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (New throughout, updates prices, market activity and comments;
new byline, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, Oct 9 (Reuters) - The dollar rose on Tuesday,
boosted by rising U.S. bond yields to a seven-week peak against
a basket of currencies, as the euro weakened further on worries
about the tension between the European Union and Italy over that
country's budget.
    The Chinese yuan steadied near a seven-week low against the
greenback as a liquidity squeeze in the offshore yuan market in
Hong Kong helped stabilize sentiment.
    "The rise in U.S. yields is much more important" to the
day's foreign exchange trading than Italy's fiscal problems,
said Thomas Flury, head of currency strategy at UBS Global
Wealth Management's Chief Investment Office in Zurich. "The
market needs to digest this to see whether it's a long-term
    Investors dumped U.S. bonds last week on fears that domestic
inflation might accelerate, prompting the Federal Reserve to
hasten the pace of interest rate hikes.
    On Tuesday, the benchmark 10-year Treasury yield
climbed to a seven-year high at 3.261 percent before receding a
    An index that tracks the dollar versus six major currencies
 was up 0.08 percent at 95.839 after hitting a seven-week
peak at 96.155.
    Sparring between Washington and Beijing on trade and Italy's
proposed hefty debt target have stoked worries about slowing
global growth, feeding safe-haven demand for the dollar.
    The International Monetary Fund on Tuesday reduced its
global growth forecasts for 2018 and 2019 to 3.7 percent from
3.9 percent for both years.
    Earlier, Italian Economy Minister Giovanni Tria struck a
resolute tone on his controversial budget plans in Rome's
parliament. Italy's benchmark 10-year government bond yield rose
toward a 4-1/2-year high.
    While the spike in Italian yields has not spread to other
peripheral government debt, "it hurts the sentiment in Europe
somewhat," Flury said.
    The euro fell to a seven-week low of 1.14325. It
was last at 1.14850, down 0.05 percent. The single currency
 was down -0.01 percent at 130.130 yen.
    A surging greenback is hurting emerging markets as they
struggle with tighter liquidity and capital outflows.
    The Indian rupee fell to an all-time low of 74.395
per dollar.   
    The Chinese offshore yuan fell to 6.9350 yuan per
dollar before retracing to 6.9239, which was marginally weaker
on the day.
    At the weekend, China's central bank cut requirements on
bank reserves in a bid to add more liquidity into its banking 
system as policy-makers worried about the economic impact of a
heated trade row with the United States.
    Currency bid prices at 10:30AM (1430 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1477        $1.1490     -0.11%         +0.00%      +1.1502     +1.1432
 Dollar/Yen       JPY=        113.2800       113.2300    +0.04%         +0.00%      +113.3900   +112.9400
 Euro/Yen         EURJPY=     130.07         130.10      -0.02%         +0.00%      +130.2300   +129.3500
 Dollar/Swiss     CHF=        0.9934         0.9925      +0.09%         +0.00%      +0.9955     +0.9922
 Sterling/Dollar  GBP=        1.3090         1.3088      +0.02%         +0.00%      +1.3107     +1.3034
 Dollar/Canadian  CAD=        1.2967         1.2963      +0.03%         +0.00%      +1.3003     +1.2953
 Australian/Doll  AUD=        0.7079         0.7076      +0.04%         +0.00%      +0.7093     +0.7055
 Euro/Swiss       EURCHF=     1.1405         1.1404      +0.01%         +0.00%      +1.1415     +1.1370
 Euro/Sterling    EURGBP=     0.8768         0.8775      -0.08%         +0.00%      +0.8791     +0.8761
 NZ Dollar/Dolar  NZD=        0.6450         0.6446      +0.06%         +0.00%      +0.6463     +0.6428
 Dollar/Norway    NOK=        8.2753         8.2757      +0.00%         +0.00%      +8.3072     +8.2508
 Euro/Norway      EURNOK=     9.5026         9.5103      -0.08%         +0.00%      +9.5165     +9.4822
 Dollar/Sweden    SEK=        9.1176         9.0848      +0.27%         +0.00%      +9.1451     +9.0712
 Euro/Sweden      EURSEK=     10.4691        10.4406     +0.27%         +0.00%      +10.4821    +10.4223
 (Additional reporting by Tom Finn in London
Daniel Leussink in Tokyo
Editing Ed Osmond and David Gregorio)
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