FOREX-Dollar rallies as U.S. bond yields jump, oil retreats

By Naomi Tajitsu

LONDON, May 29 (Reuters) - The dollar rose against a basket of major currencies on Thursday after hawkish Federal Reserve comments prompted a jump in short-dated U.S. bond yields, lifting demand for assets denominated in the U.S. currency.

The U.S. currency was also bolstered after U.S. durable goods data came in less weak than expected, quelling some jitters about U.S. economic health. Retreating oil prices also offered broad dollar support.

"We've seen a big uptick in U.S. yields," said David Pais, currency strategist at Citigroup. "It's very much U.S.-euro yield differentials that is driving euro/dollar lower."

The euro slipped 0.5 percent to $1.5547 EUR=. Some traders also said that selling in the pair by Russian names was pulling the pair away from one-month highs hit earlier this week at $1.5818.

Two-year Treasury yields US2YT=RR surged 12 basis points to 2.7546 percent, its highest since the start of the year, after Dallas Fed President Richard Fisher on Wednesday said that U.S. rates may rise "sooner rather than later" if inflation persists [ID:nN2852973].

In the euro zone, the two-year Schatz yield EU2YT=RR hit a nine-month high of 4.303 percent, but its rise was only half that of its U.S. counterpart.

The euro also lost ground after figures showed the first rise in Germany's seasonally adjusted jobless total in over two years [nBAE001233]. At the same time, euro zone economic sentiment stabilised in May, but consumers became more gloomy.

The dollar rose half a percent on the day to 72.926 against a basket of six major currency rivals .DXY, approaching a two-week high. It rallied by the same amount to 105.29 yen JPY=.