Dollar hovers near one-week low in Asia

The dollar hovered near a one-week low against a basket of currencies on Tuesday, but recent signs of improvement in the US economy and rising Treasury yields were likely to lend it some support. The dollar index was marginally higher at 79.533 by 0540 GMT, regaining a bit of ground after dipping to 79.354 on Monday, its lowest level since March 9. One possible support level lies roughly around 79.30, its 100-day moving average.
"I don't expect to see the dollar pull back significantly," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong. A trader for a major Japanese bank in Singapore attributed the euro's rise on Monday to a short squeeze, after the European Central Bank (ECB) said it did not buy any bonds under its bond buying programme last week.
"The market took the news as a sign that bond markets in the euro zone have been recovering on their own, even without such ECB support," the trader said. While market players remain mindful of the risk that the euro zone's sovereign debt crisis could flare up again, and fret that Portugal may eventually need to restructure its debt like Greece, there have been some signs of stabilisation in the euro zone's bond markets this year.
The Australian dollar fell 0.4 percent to $1.0568, coming under pressure after global miner BHP Billiton said it saw signs that growth in iron ore demand was flattening in China, Australia's single biggest export market. A recent improvement in US economic data coupled with a modest brightening of the US Federal Reserve's economic outlook in its policy statement last week prompted investors to scale back expectations of further monetary easing in the near term, helping spur a rise in US Treasury yields.
The 10-year US Treasury yield rose to as high as 2.392 percent on Monday, its highest level since late October. Moves in the dollar versus the yen were subdued on Tuesday with Japanese financial markets closed for a national holiday. The dollar inched up 0.1 percent to 83.43 yen. The dollar has taken a breather after rallying to an 11-month high of 84.187 yen on Thursday on trading platform EBS. One near-term risk for the dollar maybe market positioning, which seems to be tilted toward being long the dollar and short the yen, said the trader for a major Japanese bank in Singapore.