Greenback remains stable despite rise in Treasury yields

The US dollar was stable against other major currencies on Thursday in quiet pre-Easter trade, despite solid US economic data that pushed US Treasury bond yields higher.

The euro bought US$1.2108 around 9pm GMT, against US$1.2104 late on Wednesday in New York. The US dollar was also trading at ¥118.54, from ¥118.51 on Wednesday.

The greenback had earlier edged modestly higher after the 10-year Treasury bond yield climbed above 5 percent for the first time in four years, on the back of strong retail sales and consumer sentiment data.

But it later steadied as traders squared positions before a holiday on Friday. US markets reopen tomorrow.

"The dollar had positive momentum going into the numbers but the numbers themselves, I don't think were enough to push the dollar higher," said Lara Rhame, currency strategist at Credit Suisse First Boston.

"What we've seen ... is the dollar moving on the back of the bond market. The 10-year rose to a new cyclical high again," she added.

The US Commerce Department reported that US retail sales increased 0.6 percent last month, owing to unexpected strength in the automobile and building materials sectors.

"The data was slightly positive. The dollar was a bit better bid. But it's very thin trading ... so the move was a bit exaggerated," said John McCarthy, director of foreign exchange trading at ING Capital Markets.

On the bond market, the yield on the benchmark 10-year Treasury note rose to 5.036 percent, the first time it has surpassed 5 percent since June 2002, after closing on Wednesday at 4.976 percent.

Markets are betting strongly that the US Federal Reserve will hike US interest rates again when it next meets next month. But expectations are now rising that the US central bank will increase rates even further in June and beyond.

"Overall, the fact that US rates are heading higher, and the health of the US economy is pretty much in line and doing quite well, is certainly supporting the dollar in the short run," ING's McCarthy said.

The Fed last month raised its benchmark Federal funds rate by a quarter-point for the 15th time in a row to 4.75 percent, the highest level for five years, to ward off inflationary pressures.

That contrasted with last week's decision by the European Central Bank to hold eurozone borrowing costs at 2.5 percent.

But the interest-rate gap between the transatlantic economic titans is expected to narrow toward the end of the year.

Elsewhere, the pound was little affected by a relatively firm survey by the British Chambers of Commerce. Sterling was changing hands at US$1.7521 at 9pm GMT, up slightly from US$1.7494 on Wednesday.

The US dollar bought 1.2977 Swiss francs, against SF1.2984

On Friday, the greenback lost ground against the New Taiwan dollar on the Taipei Foreign Exchange, decreasing NT$0.017 to close at NT$32.481. A total of US$680 million changed hands during the day's trading.

The US currency opened at NT$32.520 and fluctuated between NT$32.425 and NT$32.540.