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FOREX-Dollar edges down from highs as oil slides, pound stuck near 2-month low
June 21, 2017 / 12:21 AM / 2 months ago

FOREX-Dollar edges down from highs as oil slides, pound stuck near 2-month low

* Dollar index edges away from 1-month highs

* Crude oil tumble depresses US yields, weighs on dollar

* Pound slides to 2-mth low with higher rate hopes doused

By Shinichi Saoshiro

TOKYO, June 21 (Reuters) - The dollar edged back from one-month highs against a basket of currencies early on Wednesday as a tumble in crude oil prices pushed down U.S. yields, while the pound wobbled near a two-month low after Bank of England Governor Mark Carney shot down hopes of a British interest rate hike.

The dollar index against a group of major currencies was a touch lower at 97.719.

It had gone to a one-month high of 97.871 on Tuesday as expectations that the U.S. Federal Reserve, which hiked interest rates last week, would tighten policy again in 2017 had energised dollar bulls.

The greenback's advance, however, stalled as the dollar-supportive bounce in U.S. Treasury yields ended overnight.

The 10-year Treasury note yield fell sharply on Tuesday, reversing a large portion of the gains it made when the Fed left the door open for another rate increase this year, following a big drop in oil prices.

"Lower crude prices weaken inflationary pressures and in turn arrest the rise in U.S. yields," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"U.S. inflation indicators have not been strong to start with. Now that oil is falling, it could add further pressure to the dollar by weakening sentiment towards the U.S. energy sector."

The dollar was down 0.1 percent at 111.320 yen, off a near one-month peak of 111.790 touched on Tuesday.

The euro was steady at $1.1137.

The pound was little changed at $1.2634. The currency had slid 0.9 percent overnight and plumbed a two-month trough of $1.2603.

Sterling took a hit after BoE's Carney said on Tuesday that now was not the time to raise UK interest rates. Last week three out of eight BoE policymakers voted in favour of a rate hike and raised hopes for a near-term tightening.

Oil fell about 2 percent on Tuesday, with Brent settling at seven-month lows, after increased supply from several key producers overshadowed high compliance to an output cut deal among OPEC and non-OPEC oil producers. (Reporting by Shinichi Saoshiro; Editing by Eric Meijer)

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