Last updated: June 24, 2013 9:30 pm

Dollar pares early advance

The dollar retreated from early highs as US Treasury bond yields edged back from multi-month peaks, as the markets continued to digest the Federal Reserve’s plans to tighten monetary easing.

The dollar index, which weighs the US currency against key counterparts, hit its strongest level since the start of the month before easing back to trade flat.

But higher-yielding developed market currencies suffered losses against the dollar. The Swedish krona and Norwegian krone were the largest fallers, with the US currency rising 1.3 per cent to SKr6.7562 and 1.2 per cent to NKr6.1310, respectively.

The euro touched its weakest level in more than two weeks, but recovered to stand unchanged at $1.3125 in late New York trade. German business sentiment rose in June with the Ifo index climbing to 105.9 versus 105.7 in May.

Figures released on Friday from the US Commodity Futures Trading Commission showed that more traders bet the euro would rise rather than fall last week for the first time since February.

Analysts said the single currency had benefited in recent weeks from outflows from emerging market currencies.

“For portfolio managers that are structurally long dollars, the euro may have become an attractive safe haven proxy,” said analysts at Citigroup.

EM currencies continued to fall against the dollar, though, at a slower pace than the sharp sell-off seen the previous week after
the Fed warned it could slow the rate at which it buys bonds to aid the US economy.

The Indian rupee and the South Korean won were among the biggest fallers against the dollar, which rose 0.7 per cent to Rs59.67 and 0.6 per cent to Won1,161, respectively.

The South African rand was among the few EM currencies to claw back some losses. The dollar fell 0.5 per cent against the rand to R10.10.

The dollar also later reversed gains against both the yen. The US currency was 0.2 per cent lower against the yen at Y97.66.

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