The dollar's recovery stops, but remains solid on the US economy and the prospects of the Fed

TOKYO (Reuters) – The dollar has slid again from Wednesday's seven-week high, although the underlying support for the greenback remains strong, despite the convergence of several factors, including a strong US economy and a steady rate hike by the Federal Reserve.

While US Treasury yields surpassed their overnight peaks, the trend of further rises remained unchanged, with investors worried that mounting inflationary pressures would keep the Fed focused on tightening monetary policy. , even as US President Donald Trump was targeting the hawks' bent of policy makers.

Sterling hoped that Britain and the European Union could be on the brink of negotiating an agreement on Brexit, while the markets were at the center of concerns, including the intensification of the Sino-US trade dispute and budget plans. Italy.

On Wednesday, the dollar index = the US dollar remained virtually unchanged at 95,575, close to 96,163 reached in the previous session – its highest level since August 20.

"There seems to be a bit of depletion on the part of the foreign exchange market," said Bart Wakabayashi, director of the Tokyo branch at State Street Bank.

"We do not see the extent of purchases of dollars (against the euro and the yen)," he said.

The day before, Sterling had learned in an article published by Dow Jones Newswires that an agreement on the conditions for the exit of the British economic bloc could be reached as early as Monday.

Dow Jones, citing unidentified diplomats, said that Britain and the EU had reduced their disputes around the Irish border, but that some problems had not been solved.

Sterling GBP = D4 gained 0.1%, peaking at nearly two weeks of $ 1.3161, after rising 0.4% in the previous session.

The euro EUR = gained 0.17% to 1.1511 USD.

The single currency slid overnight to a minimum of seven weeks at 1.144325 after yields on the 10-year Italian title reached their highest level in four and a half years, despite comments by Italy's minister of finance. Economy, Giovanni Tria.

Tria said Italy would do everything necessary to restore calm if the market turbulence turned into a financial crisis, adding that fears about the country's fiscal plan for next year were unjustified, although that his remarks failed to reassure investors.

The 10-year US Treasury yield, US10YT = RR, was set at 3.21% on Wednesday, after peaking at 7.21% over a seven-year period.

"Upside US bond yields have obviously supported the dollar," said Yukio Ishizuki, currency management strategist at Daiwa Securities in Tokyo.

"In the short term, the dollar can be sold, but I do not think it will last long. The dollar will start to strengthen again.

Some traders said the comments by Donald Trump, the US president, helped cool Treasury bill yields.

In the United States on Tuesday, Trump said he did not like what the Fed was doing because inflation is "really controlled" and he does not think it's "necessary to go so fast "to raise rates.

The Fed's latest interest rate hike in September left intact its intention to gradually tighten monetary policy.

Against the Japanese yen JPY =, the dollar rose slightly, trading at 113.04 yen.

The Australian dollar AUD = D4 pulled 0.2% up, from US $ 0.7119 downward on US bond yields, as prices of major commodity exports benefited from Chinese demand.

Elsewhere, China's offshore yuan CNY = D4 fell further, falling 0.1% to 6.9229 yuan to the dollar.

A Reuters poll released Wednesday showed that the Chinese yuan is expected to reduce some of its latest losses against the dollar over the coming year, hoping that the risks associated with the US-China trade war strong sales in emerging markets will abate.

The CNY = CFXS Terrestrial Yuan is expected to gain about 6.92 to 6.80 for a dollar a year from now, compared with about 6.92 currently, according to the survey of more than 50 strategists in exchange.