Dollar gains broadly

The dollar index climbed against a basket of currencies on Tuesday, helped by higher US Treasury yields, while growth-linked currencies came under pressure from concerns China's demand for raw materials could be slowing. Global miner BHP Billiton said it saw signs growth in iron ore demand was flattening in China, Australia's single biggest export market, pushing the Australian dollar more than 1 percent lower on the day to $1.0488.
"The (US) dollar looks better bid against the euro and the yen. Interest rate expectations do seem to be gaining a bit more traction on the currency," said Daragh Maher, currency strategist at HSBC. "But it strikes me the move in the Australian dollar may be a bit overdone. I would think it's a good idea to buy Aussie on these dips." The dollar index rose 0.3 percent to 79.692, recovering from a one-week low hit the previous day. Analysts said much of the greenback's recent surge was due to improving US data and a modest brightening of the US Federal Reserve's economic outlook in its latest policy statement.
The 10-year US Treasury yield rose to as high as 2.392 percent on Monday, its highest level since late October. The two-year Treasury yield was last trading at roughly 0.367 percent, in sight of last week's peak of 0.414 percent which was the highest since late July. But some strategists said the move in the greenback and US Treasury yields could soon run out of steam.
"The recent dollar rally has been based on unrealistic expectations for US rates and I don't think it is well founded," said Adam Cole, global head of FX strategy at RBC Capital Markets. The euro eased 0.3 percent to $1.3196, slipping away from a one-week high near $1.3266 hit on Monday and below support from the 100-day moving average around $1.3199.
Some investors were cautious about pushing the shared currency higher ahead of talks between Italy's government and unions on reforms seen as key to turning around the euro zone's third largest economy and paying down massive debts. The dollar rose 0.4 percent to 83.73 yen, moving back towards an 11-month high of 84.187 hit on Thursday on trading platform EBS, while the yen hit a fresh four-month low versus the euro of 110.82 yen.