* Dollar bruised by lacklustre US data, China yuan surge
* Sharp drop in Treasury yields removes support for dollar
* Dollar index on track to end the week down 0.8 pct
By Shinichi Saoshiro
TOKYO, Jan 6 The dollar tottered at three-week
lows against a basket of currencies on Friday after it suffered
a swift evaporation of bullish momentum in the wake of a jump in
the Chinese yuan.
Traders are bracing for further turbulence as they await the
closely-watched U.S. jobs report due later in the session.
The dollar index against a basket of major currencies was
little changed near 101.300, its lowest since Dec. 14.
It was on track to lose 0.8 percent on the week.
The index, which had set a 14-year high of 103.820 just
three days ago, was hit overnight by lacklustre U.S. data and a
surge in the yuan which some traders suspect was orchestrated by
China to shake out large short positions against the currency.
As China works to stem capital flows and stabilise the
currency ahead of Donald Trump's inauguration as U.S. president
and the Lunar New Year, the offshore yuan has risen to
a two-month high against the dollar in nearly two months and
marked the largest two-day rise since its inception in 2010.
"The yuan surge is the biggest catalyst for the dollar's
slide. The dollar weakened as the yuan's slide amid capital
control concerns is reminiscent of last January, when the yuan
fell under similar circumstances," said Shin Kadota, chief Japan
FX strategist at Barclays in Tokyo.
"The global economy looks to be in better shape compared to
a year ago so the risk-off trend could be limited. But
China-related headlines appear to have given participants to
adjust positions which had excessively favoured the dollar."
China is expected to report December and full-year 2016
foreign exchange reserves on Saturday amid concern over the
speed at which it is burning through its dollar cash pile in
defence of the yuan.
The data is expected to show reserves precariously perched
just above the critical $3 trillion level at end-December, the
lowest level since February 2011, according to a Reuters poll.
The greenback was down 0.2 percent at 115.150 yen
after falling 1.6 percent overnight.
The euro was steady at $1.0608 after rallying 1.3
percent the previous day to pull away from a 14-year trough of
$1.0340 set on Tuesday.
The dollar has lost support from U.S. Treasury yields, which
has pulled back sharply past three days from their highest
levels since September 2014 marked in December as investors grew
risk-averse amid uncertainty about the incoming Trump
Treasury yields declined further on Thursday as the ADP
National Employment Report showed that U.S. private employers
added 153,000 jobs last month, below economists' expectations
for a gain of 170,000. The 10-year Treasury note yield
was at 2.353 percent on Thursday, having come down
from the peak above 2.640 percent reached last month.
Investors are now focused on Friday's U.S. non-farm payrolls
report in which economists expected jobs gains of 178,000 in
The Australian dollar was flat at $0.7339 after
gaining 0.7 percent overnight, when it touched a three-week high
The New Zealand dollar traded a shade lower at $0.7020
after climbing to a three-week peak of $0.7040.
(Editing by Kim Coghill)