* Dollar/yen pulls back from 10-month high
* Euro holds gains made on higher bund yields, Italy relief
* Higher crude oil prices buoy commodity-linked currencies
(Updates prices, adds details and quotes)
By Shinichi Saoshiro
TOKYO, Dec 13 The dollar steadied against the
yen and euro on Tuesday as a surge in Treasury yields was
tempered and as the market braced for the outcome of the Federal
Reserve's policy meeting starting later in the day.
The euro was little changed at $1.0629. The common
currency had gained 0.7 percent overnight, helped by higher
German bund yields and on relief as Rome was seen ready bail out
Italian bank Monte dei Paschi di Siena.
The dollar was nearly flat at 115.140 yen.
It climbed overnight to as far as 116.120, its highest since
early February as the benchmark 10-year Treasury yield
popped above the 2.5 percent threshold on a surge by
oil prices to a level unseen since September 2014. The
greenback, however, retraced its gains as Treasury yields ended
Thursday significantly below their peaks.
"The dollar will continue to have 120 yen in its sights. But
a 25 basis points rate hike by the Fed is also significantly
priced in, and the dollar is likely to be locked in between
trend following bulls and profit-takers," said Masafumi
Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
Fed fund futures show a 97 percent probability that the Fed
will lift rates by a quarter of a percentage point, according to
the CME Group.
The markets will be watching for clues about the pace of
hikes in 2017, eager to know if the U.S. election resulting in
Donald Trump's victory has reshaped the central bank's growth
and inflation outlook.
Speculation that the Fed would hike more times in 2017 than
expected prior to Trump's win has been a factor that has
propelled the dollar higher over the past month.
"I don't expect a 'buy on rumour, sell the fact' scenario in
which the dollar slips after the Fed delivers a rate hike," said
Masashi Murata, senior currency strategist at Brown Brothers
Harriman in Tokyo.
"The Fed's dot plot could be revised higher. Furthermore,
the dollar is still in the middle of an uptrend fuelled by
prospects of monetary tightening accompanying large fiscal
spending under Trump."
The Fed's "dot plot" graph represents the interest rate
moves expected by its members. The dot plot from the previous
Fed meeting in September showed that policymakers anticipated
hikes in 2017.
The dollar index stood effectively flat at 101.00
after slipping about 0.5 percent overnight on the euro's bounce.
Elsewhere, the gain in crude oil prices buoyed
commodity-linked currencies with the Norwegian crown
gaining 0.7 percent against the dollar on Monday.
The Canadian dollar was little changed at C$1.3124
per dollar following an overnight rise to a 2-month peak of
The Australian dollar was steady at $0.7501 after
adding 0.6 percent the previous day. The New Zealand dollar was
also flat, at $0.7196 following a gain of 0.7 percent
Oil rose to an 18-month high on Monday after OPEC and some
non-members reached their first deal since 2001 to jointly
reduce output to tackle global oversupply.
(Reportng by Shinichi Saoshiro; Editing by Eric Meijer & Shri