March 27, 2019 / 12:49 AM / 4 months ago

FOREX-Dollar holds gains as risk appetite recovery arrests yield decline

* Benchmark US yields pull back from 15-mth lows, support dollar

* Worries about German economy seen weighing on euro

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

By Shinichi Saoshiro

TOKYO, March 27 (Reuters) - The dollar held modest gains on Wednesday as a recovery in investor risk appetite arrested a decline in benchmark U.S. Treasury yields, which fell to 15-month lows this week.

The dollar index versus a basket of six major currencies was steady at 96.765 after edging up nearly 0.2 percent overnight.

The greenback advanced on Tuesday after 10-year Treasury debt yields rebounded due to stock gains on Wall Street.

An inversion of the U.S. yield curve, which has preceded every U.S. recession over the past 50 years, chilled risk sentiment and triggered a sharp stock selloff last week.

Yields for safe-haven bonds also declined, pressuring the dollar.

“Bids for the dollar are returning with Treasury yields off their lows, and also because negative views towards the European economy have done no favours for their currency,” said Shin Kadota, senior strategist at Barclays in Tokyo.

The euro was a shade higher at $1.1274 after shedding 0.4 percent the previous day. The currency has been on shaky ground after Friday’s weaker-than-expected German manufacturing survey raised concerns about Europe’s largest economy.

The dollar slipped 0.15 percent to 110.475 yen, losing some steam after surging 0.6 percent against its Japanese peer on Tuesday.

The pound nudged up 0.1 percent to $1.3215.

Sterling has drawn mild support after two eurosceptic British lawmakers indicated on Tuesday that they might agree to support Prime Minister Theresa May’s EU withdrawal deal rather than risk parliament cancelling Brexit.

The Australian dollar, sensitive to shifts in risk sentiment, stood little changed at $0.7135 after gaining 0.3 percent the previous day.

The 10-year U.S. Treasury note yield was a touch higher at 2.417 percent. The yield had fallen on Monday to 2.377 percent, its lowest since December 2017. (Reporting by Shinichi Saoshiro; editing by Darren Schuettler)

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