FOREX-Dollar reigns supreme on yields, recovery advantage

    * Dollar at 9 month high vs yen, 3 1/2-month high on euro
    * Vaccinations fan hopes of faster U.S. economic recovery
    * Emerging market currencies battered by higher U.S. yields 
    * Graphic: World FX rates

 (Adds comments, updates prices)
    By Hideyuki Sano and Sagarika Jaisinghani
    TOKYO, March 9 (Reuters) - The dollar held near a 3
1/2-month high against its rivals on Tuesday as higher bond
yields and expectations of faster economic normalisation from
the pandemic in the United States put the U.S. currency at an
    The dollar's index against six major currencies rose 0.1% to
92.469, its highest since late November, building on a
0.5% gain on Monday.
    Against the yen, the dollar rose to 109.235 yen, its
highest level in nine months, while the euro was nearly flat at
$1.18530, hovering near lows last seen in late November.
    The safe-haven Swiss franc softened to 0.9369 per dollar
, its lowest level since late July, while the British
pound inched up 0.1% to $1.3834, having touched a
three-week low of $1.3779 on Friday.
    "The move in the last two to three weeks has been driven by
real yields, and that is what is supporting the dollar," said
Mayank Mishra, an FX strategist at Standard Chartered Bank in
    "It is interesting that despite the fact that U.S. equities
have started to bear the pain of rising yields, dollar/yen
continues to make new highs," Mishra added. "The pair's own risk
correlations have broken down and real yields are in the driving
    The dollar index has firmed more than 2% so far this year as
upbeat marcoeconomic data, combined with a loose monetary
policy, has lifted bond yields and pressured richly valued U.S.
technology stocks.
    All eyes will now be on the U.S. Federal Reserve's two-day
meeting next week, although expectations are low that the
central bank will announce major policy changes after Chair
Jerome Powell last week did not express concern about the rise
in bond yields. 
    "The thing that markets are going to get from the FOMC
that's new is an update to their forecasts for inflation,
economic growth and unemployment," said Commonwealth Bank of
Australia currency analyst Joseph Capurso.
    "They're going to have do some upgrades if they have already
taken into account the almost certain passage of the ($1.9
trillion) stimulus package. If they haven't taken that into
account because it's not law yet, then they won't do the
upgrades and that might give markets a little bit of a shock."
    The 10-year U.S. bond yield stood near a
one-year peak hit on Friday.
    Traders are wary yields could rise further this week as the
market will have to digest a $120 billion auction of 3-, 10-,
and 30-year Treasuries, especially after last week's soft
auction and a horrible 7-year note sale that saw a spike in
    Higher U.S. yields have started to undermine emerging market
currencies, which had attracted funds escaping rock-bottom bond
returns in the United States.
    MSCI's emerging market currency index
dropped to a three-month low after a fall of 0.82% on Monday,
the biggest fall in about a year, with high-yielding currencies
hit hard.
    The Brazilian real sank to a ten-month low while the
Turkish lira fell nearly 3% to its lowest level
since mid-December. 
    Elsewhere, gold also slipped to a nine-month low on
    Currency bid prices at 0356 GMT:
 Description       RIC        Last              U.S. Close                        Pct Change             YTD Pct                   High Bid                 Low Bid
                                                 Previous                                                 Change                                            
                                                 Session Euro/Dollar                  $1.1864           $1.1846                           +0.17%                 +0.00%                    +1.1866                  +1.1836
 Dollar/Yen                   109.0800          108.9100                          +0.27%                 +0.00%                    +109.2300                +108.9800
 Euro/Yen                     129.41            129.03                            +0.29%                 +0.00%                    +129.5000                +129.0100
 Dollar/Swiss                 0.9355            0.9369                            -0.14%                 +5.75%                    +0.9375                  +0.9356
 Sterling/Dollar              1.3847            1.3818                            +0.21%                 +1.35%                    +1.3849                  +1.3803
 Dollar/Canadian              1.2648            1.2666                            -0.13%                 +0.00%                    +1.2684                  +1.2649
 Aussie/Dollar                0.7660            0.7647                            +0.20%                 +0.00%                    +0.7662                  +0.7621
 NZ Dollar/Dollar             0.7129            0.7119                            +0.15%                 +0.00%                    +0.7133                  +0.7103 All spots
Tokyo spots
Europe spots 
Tokyo Forex market info from BOJ 

 (Reporting by Hideyuki Sano in Tokyo and Sagarika Jaisinghani
in Bengaluru; Editing by Gerry Doyle)

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