FOREX-Dollar firms after U.S. yield spike; yen continues march lower

    (Corrects day in first paragraph)
    * Rise in yields globally spark inflation fears
    * Cryptocurrencies slide as risk appetite sours
    * Graphic: World FX rates

    By Kevin Buckland
    TOKYO, Feb 26 (Reuters) - The U.S. dollar held gains on
Friday after rebounding overnight from three-year lows following
a spike in U.S. bond yields.
    The yen, which tends to weaken when U.S. yields rise, slid
to a fresh six-month low versus the greenback.
    Government bonds, and particularly U.S. Treasuries, have
become the focal point of markets globally, which have
aggressively moved to price in earlier monetary tightening than
signalled by the Federal Reserve and its peers.
    The yen's decline came even amid a sell-off in stocks, as
the surge in yields fomented inflation worries. The yen and
dollar are both traditional haven currencies.
    Emerging-market and commodity-linked currencies retreated,
with the Australian and Canadian dollars stepping back from
three-year highs.
    Cryptocurrencies also tumbled, with bitcoin sliding 5%
overnight and ether dropping 9%.
    "The fixed income rout is shifting into a more lethal phase
for risky assets," after initially being interpreted as a "story
of improving growth expectations," Westpac strategists wrote in
a client note.
    "It appears to be the case that bond markets are 'taking on'
the central bankers' world view, and standing in front of the
current momentum is unwise."
    Bond yields have climbed this year on the outlook for
massive fiscal stimulus amid continued ultra-easy monetary
policy, led by the United States.
    An acceleration in the pace of vaccinations globally has
also bolstered what has become known as the reflation trade,
referring to bets on an upswing in economic activity and prices.
    In recent days though, a rise in inflation-adjusted bond
yields has accelerated, indicating a growing belief that central
banks may need to pare back ultra-loose policies, despite their
dovish rhetoric.
    The benchmark 10-year Treasury yield spiked
above 1.6% overnight for the first time in a year, after an
auction of $62 billion of 7-year notes was met with weak demand.

    The dollar index edged up to 90.381, holding on to a
0.2% rise from Thursday, when it rebounded from losses of as
much as 0.26% before the bond tender.
    The greenback was little changed at 106.2 yen
after earlier touching 106.43 for the first time since
September. It has strengthened 2.8% after the first back-to-back
monthly increases since mid-2018, putting the yen among the
worst performing major currencies this year.
    The Australian dollar continued its retreat after
topping $0.80 on Thursday for the first time since February of
2018, declining 0.2% to 0.78525.
    The Canadian dollar weakened to C$1.2613 after
falling from its own three-year top to the greenback at C$1.2468
    The euro weakened 0.1% to $1.2158 after touching a
seven-week high of $1.22435 on Thursday.
    Bitcoin was slightly weaker Friday at $46,704,
while ether slipped to $1,476.

    Currency bid prices at 110 GMT
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change
 Euro/Dollar                  $1.2156        $1.2175     -0.14%         -0.49%      +1.2185     +1.2137
 Dollar/Yen                   106.2270       106.2100    +0.02%         +2.85%      +106.4170   +106.1700
 Euro/Yen                     129.14         129.35      -0.16%         +1.75%      +129.5300   +128.9900
 Dollar/Swiss                 0.9054         0.9051      +0.04%         +2.35%      +0.9066     +0.9049
 Sterling/Dollar              1.3991         1.4009      -0.14%         +2.39%      +1.4024     +1.3950
 Dollar/Canadian              1.2619         1.2605      +0.09%         -0.93%      +1.2647     +1.2598
 Aussie/Dollar                0.7848         0.7870      -0.27%         +2.03%      +0.7882     +0.7823
 NZ                           0.7348         0.7370      -0.28%         +2.34%      +0.7380     +0.7310

All spots
Tokyo spots
Europe spots
Tokyo Forex market info from BOJ

 (Reporting by Kevin Buckland; Editing by Stephen Coates)

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