* Yen sets fresh three-year low against the greenback
* Euro slides to lowest since July 2020 against dollar
* Energy prices stoke inflation concerns
* U.S. CPI data to be released on Wednesday
NEW YORK, Oct 12 (Reuters) - The dollar hit a one-year high
on Tuesday on expectations the U.S. Federal Reserve will
announce a tapering of its massive bond-buying program next
month, and as concerns over soaring energy prices also sent
investors to the safe-haven greenback.
Yields on the U.S. two-year Treasury note jumped to their
highest in more than 18 months, as investors sold U.S. debt,
reckoning that surging energy prices would fuel inflation and
add to pressure on the Fed to take action sooner than
"The focus right now is Treasury rates," said Joseph
Trevisani, senior analyst at FXStreet.com. "The credit markets
are anticipating the taper starting, I think, in November."
Investors will watch U.S. Consumer Price Index data on
Wednesday and retail sales data on Friday for further clues as
to when the Fed might begin winding down stimulus.
"The data is going to be huge," said Joe Manimbo, senior
market analyst at Western Union Business Solutions.
"These numbers will speak to both the inflation outlook, as
well the extent to which third-quarter growth likely moderated.
So if we get another hot print on inflation tomorrow, that would
tend to cement tapering this year and maybe lead the market to
fine-tune expectations on when we could see lift-off on interest
rates," he said.
The dollar index, which measures the greenback against a
basket of major currencies, touched 94.563, its highest
since late September 2020.
The spike in U.S. yields prompted investors to dump the
Japanese yen versus the dollar, resulting in the second-biggest
daily fall in the Japanese currency on Monday.
As Treasury yields rose further on Tuesday, the dollar hit a
three-year high versus the yen, which has fallen 4% versus the
greenback in three weeks.
"The primary driver of the move is the further rise that
we've seen in U.S. Treasury yields - so it's a fairly simple
story of a widening rates differential ... adding to the
attraction of the carry trade," said Ray Attrill, head of
foreign exchange strategy at National Australia Bank.
A Deutsche Bank monthly market sentiment survey this month
noted that an overwhelming majority of respondents expect U.S.
Treasury yields to rise from current levels.
The dollar also strengthened against the euro,
with the common currency down 0.23% at $1.1525, its lowest since
July 2020 as rising energy prices fed worries inflation may dent
Oil passed $84 a barrel, within sight of a three-year high,
before easing slightly, as a rebound in global demand after the
worst of the pandemic caused price spikes and shortages in other
energy sources. Coal has scaled record peaks and gas prices
remain four times higher in Europe than at the start of 2021.
The ZEW indicator of economic sentiment in Germany slipped
for the fifth month, the latest in a string of indicators
showing supply bottlenecks holding back recovery in Europe's
The commodity-linked Australian dollar was up 0.16%
In cryptocurrencies, bitcoin was down 3.02% at
$55,750. Ether, the world's second biggest
cryptocurrency dropped 1.38% to $3,495.
(Reporting by John McCrank; additional reporting by Saikat
Chatterjee in London; Editing by Kirsten Donovan, Bernadette
Baum and David Gregorio)