* Dollar index pulls away from 6-1/2-month lows
* Rise in U.S. Treasury yields supports the dollar
* Focus shifts from U.S. politics to Fed policy for time
* Fed's meeting meets due later in session awaited for cues
(Updates prices, adds details and quotes)
By Shinichi Saoshiro
TOKYO, May 24 The dollar held firm on Wednesday,
having rebounded from 6-1/2-month lows against its major peers
helped by a rise in U.S. Treasury yields, while the yuan eased
after Moody's cut its sovereign rating on China due to concerns
over the country's soaring debt.
The dollar index held steady against a basket of six
currencies at 97.321 after bouncing 0.4 percent the
It managed to pull away from the 96.797 level plumbed on
Monday, its lowest since Nov. 9, when concerns over U.S.
politics stemming from the Trump election campaign's suspected
links with Russia took a toll on the greenback.
The dollar was boosted as U.S. debt prices fell, with the
benchmark 10-year Treasury note yield climbing 3
basis points overnight and putting some distance between the
one-month trough reached last week in a bond-buying flight to
"The rise in Treasury yields is supporting the dollar. It
appears that speculative buying of Treasuries has run its
course, with Trump concerns and geopolitical risks no longer
fresh news," said Yukio Ishizuki, senior currency strategist at
The dollar was firm at 111.795 yen after a bounce to
111.995 yen, its highest in a week.
The U.S. currency also managed to halt its slide against the
euro, which had enjoyed a bull run this month on factors
including an ebb in French political concerns, upbeat euro zone
data, and a widening German-U.S. government debt yield spread.
The euro was little changed at $1.1191, nudged away
from a 6-1/2-month high of $1.1268 scaled the previous day.
Investors are now turning their focus towards the Federal
Reserve's monetary policy stance. Minutes of the Fed's latest
policy-setting meeting are set for publication at 2 p.m. eastern
time (1800 GMT) on Wednesday.
The market already expects the Fed to raise interest rates
in June, but given the greenback's recent weakness, dollar bulls
are expected to welcome any hawkish hints by the central bank.
MOODY'S DOWNGRADES CHINA
Moody's Investors Services on Wednesday downgraded China's
long-term local and foreign currency issuer ratings by one notch
to A1 from Aa3, citing expectations that the financial strength
of the world's second-biggest economy would erode in the coming
China's offshore yuan slipped in knee-jerk reaction but the
overall response was limited. The yuan fell to 6.8901 per dollar
, down by 0.1 percent, before pulling back to 6.8841 for
a loss of about 0.05 percent.
The Australian dollar, sometimes used as a proxy of
China-related trades, eased slightly but reaction to the
downgrade was also relatively subdued. The Aussie was down 0.15
percent at $0.7466.
"Currencies are reacting quite calmly, as China is still
seen to have enough reserve strength for further fiscal
spending," said Masahiro Ichikawa, senior strategist at Sumitomo
Mitsui Asset Management.
Elsewhere, the Canadian dollar stood steady at C$1.3518
per dollar after touching C$1.3457 overnight, its
strongest in a month.
A rise in crude oil prices lifted the Canadian dollar. The
focus is now on the OPEC meeting in Vienna on Thursday to see
whether a deal to prolong output cuts can be struck.
The pound was nearly flat at $1.2965, with the
market awaiting further developments in Britain's suspended
election campaign after the suicide bombing in Manchester.
(Reporting by Shinichi Saoshiro; Editing by Eric Meijer and