* Dollar index trades above previous day’s 1-1/2 week low
* Previous day’s rise in U.S. 10-year yield supports dollar
* U.S. retail sales data coming up later on Tuesday
By Masayuki Kitano
SINGAPORE, May 15 (Reuters) - The dollar inched higher against a basket of currencies on Tuesday, having pulled up from its lowest level in more than a week as hopes for easing global trade tensions pushed U.S. bond yields higher.
The dollar’s index versus a basket of six major peers rose 0.1 percent to 92.638, inching away from a trough of 92.243 set on Monday, which was the lowest for the dollar index since May 2.
The benchmark 10-year U.S. Treasury yield was steady in Asian trading on Tuesday at 2.999 percent, after rising 2 basis points on Monday.
The U.S. 10-year bond yield had edged higher on Monday, as trade tensions eased in the wake of U.S. President Donald Trump’s pledge to help Chinese telecommunications company ZTE Corp, which has been penalised for violating U.S. sanctions with Iran.
The dollar index had scaled a four-month high of 93.416 last week, as a rise in U.S. Treasury yields highlighted the wide interest rate gap between the United States and some other developed economies, and bolstered the dollar’s appeal.
Although the dollar’s rally has lost steam after soft April U.S. consumer price data released last week raised doubts as to whether the U.S. Federal Reserve would raise interest rates as many as four times in 2018, some traders remain upbeat about its near-term outlook.
Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore, said he is comfortable remaining long U.S. dollar, with interest rate differentials still likely to work in the greenback’s favour.
“The only thing I can really see right now is the...interest rate differential,” Innes said.
Innes added that he would probably stay with his dollar positive view until there is either a wave of positive economic data from countries other than the United States, or until the European Central Bank starts to sound “overtly hawkish instead of just tentatively”.
The euro edged up 0.1 percent to $1.1934, but remained below Monday’s high of $1.1996, which was the common currency’s highest level since May 3.
The euro had strengthened on Monday after European Central Bank policymaker Francois Villeroy de Galhau said that the ECB could give fresh guidance on the timing of its first rate hike as the end of its exceptional bond purchases approaches.
Despite the dollar’s recent rally, some analysts remain sceptical about the chances of a sustained push higher in the greenback.
Growing worries about the U.S. budget deficit, which is projected to balloon to more than $1 trillion in 2019 due to a government spending splurge and large corporate tax cuts, have dimmed the outlook for the greenback, along with concerns about the country’s current account deficit.
Against the yen, the dollar rose 0.1 percent to 109.74 yen . The greenback faces resistance on technical charts at levels around 110.00 yen, having set a three-month high of 110.05 yen in early May.
Investors are focused this week on speeches by Fed officials, as well as economic indicators such as U.S. retail sales data due later on Tuesday. (Reporting by Masayuki Kitano Additional reporting by Karen Brettell in New York; Editing by Sam Holmes)