* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
* Fed speakers expected to repeat that rates will remain low
* Dollar loses ground as Treasury yields stall
* Yen falls on crosses as economic concerns grow
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Ritvik Carvalho
LONDON, May 18 (Reuters) - The dollar sank to a six-year
trough against the Canadian dollar and teetered near multi-month
lows versus European currencies on Tuesday, as Treasury yields
stalled amid renewed expectations the United States will not
hike interest rates anytime soon.
Dallas Federal Reserve President Robert Kaplan on Monday
reiterated that he does not expect interest rates to rise until
next year, fuelling a further decline in bets that inflationary
pressure could force the Fed to act sooner.
This week a host of Fed policymakers are scheduled to speak,
and the U.S. central bank will also release minutes from its
most recent meeting, which may give indications about where
monetary policy is headed.
The growing market consensus is that the Fed will tolerate
what it sees as a temporary acceleration in inflation, which
will keep the dollar lower against most major currencies.
"The dollar is on its knees and this seems to be a direct
result of how investors feel about the U.S. inflation outlook
and the Fed's reaction," said Valentin Marinov, head of G10 FX
research at Credit Agricole.
Marinov highlighted two inflation outlook scenarios that
would have different impacts on the markets - the first one
being the current market expectation that price growth will soon
ease.
"This will keep the Fed dovish, U.S. real yields very
negative and the dollar weak... boosting commodity prices and
supporting risk assets," he said. "Under the second inflation
outcome, we see a more persistent rebound of the U.S. inflation
this and, potentially, early next year."
Under Marinov's central scenario, that could nudge the Fed
towards tapering bond purchases this summer, thus boosting the
outlook for U.S. Treasury yields and the dollar.
The benchmark 10-year U.S. Treasury yield stood
at 1.6471%, extending a pullback from a five-week high reached
last week.
The dollar traded at $1.22 to the euro, the single
currency hitting its highest against the greenback since Feb.
25.
The British pound rose to $1.4198, its strongest
since late February. Sterling has been buoyed as investors cheer
the gradual lifting of strict coronavirus restrictions.
The Canadian dollar advanced to a six-year high of
C$1.2013 against the greenback, aided by a rise in oil prices.
The dollar lost 0.3% to 108.96 yen. The currency
pair has been locked in a narrow range amid worries about
Japan's slow pace of vaccinations and weakness in the greenback.
Some investors were already scaling back expectations for a
Fed rate hike this year, and Kaplan's comments gave traders even
more incentive to sell the dollar.
The onshore yuan edged up to 6.4279 per dollar,
not far from an almost three-year high reached last week.
The Australian and New Zealand dollars
also rose against their U.S. counterpart.
In the cryptocurrency market, bitcoin rose 3.3%
to $45,023.53 but was still close to a three-month low after
Tesla's boss Elon Musk dented enthusiasm for the digital asset.
Rival digital currency ether rose 6.50% to $3,494
steading from a two-week low on Monday.
(Reporting by Ritvik Carvalho, Additional reporting by Stanley
White in Tokyo, Editing by Gabriela Baczynska)