REFILE-FOREX-US dollar gains broadly as Treasury yields spike

(Refiles to fix typo in headline)

* Dollar/yen posts best day since Sept. 15 as yields rise

* U.S. tax cut renewal stokes fears about fiscal health

* Euro seen likely to slide back below $1.30 by year-end
(Updates prices, adds Jim Rogers’ comments, details)

By Wanfeng Zhou

NEW YORK, Dec 7 (BestGrowthStock) – The dollar rose the most
against the yen in nearly three months on Tuesday after a
proposed extension of U.S. tax cuts triggered higher Treasury
yields, though the longer-term impact on the greenback is less
clear given an already large U.S. deficit.

The euro fell (Read more about the trembling euro. ) versus the dollar after it did not
convincingly break above $1.34. Analysts expect the euro zone
single currency to remain under pressure and slide below $1.30
in coming weeks as fears about the euro zone’s debt problems

U.S. 10-year Treasury yields (US10YT=RR: ) posted their
biggest one-day rise since June 2009 as the proposed tax deal
sparked concerns over the government’s ability to service its
debt burden. Moody’s Investors Service said it is worried the
tax cuts could become permanent, hurting U.S. finances and
credit ratings in the long run. For details see [ID:nN07283493]
and [ID:nN07282425].

“We’ve seen Treasury yields move quite a bit higher and
that’s boosted the dollar,” said Ronald Simpson, director of
currency research at Action Economics in Tampa, Florida.

In late trading, the dollar rose 1 percent to 83.50 yen
(JPY=EBS: ), on track for its biggest daily percentage gain since
Sept. 15.

An index of the dollar against a basket of other major
currencies (.DXY: ) rose 0.5 percent to 79.971, just below its
100-day moving average at 80.015.

Despite the rise in the dollar, some analysts said
deteriorating U.S. fiscal positions could pose risks to the
currency in the medium to long term. In recent years, dollar
bears have been worried about the ability of the United States
to continue funding its large deficits if foreign investors
lose faith in U.S. assets.

“There are structural risks to the dollar. The whole world
is cutting back on spending and the United States has just
announced tax cuts,” said Jessica Hoversen, fixed income and
currency analyst at MF Global in Chicago.

“However, the economic data has looked better. People are
still active buyers of U.S. Treasuries. There are arguments to
be made that the dollar won’t aggressively resume its
downtrend,” she added.


The euro (EUR=EBS: ) last traded down 0.3 percent at $1.3262
having hit a session high of $1.3401 on trading platform EBS.
Key resistance lies at around $1.3472, the 38.2 percent
Fibonacci retracement of the euro’s fall in November.

Ireland’s parliament passed the first in a series of
resolutions underpinning the 2011 budget on Tuesday, marking
the first step in a lengthy approval process. [ID:nWLA0218]

Investors continued to sell the euro on any bounce as
optimism about an Irish budget was overshadowed by broader
worries about the European Union’s ability to keep debt
problems from spreading.

Hedge fund manager David Einhorn, chairman and founder of
the $6.8 billion Greenlight Capital, said he doesn’t expect the
euro to gain much traction against the dollar as the European
situation has yet to stabilize.

“It’s still an open question. It’s still in progress,” he
said at the Reuters Investment Outlook Summit on Tuesday.

Influential U.S. investor Jim Rogers told Reuters that euro
zone bailouts are corroding the value of the euro and that he
doesn’t expect the euro to be around for 10 to 15 years.

Take a Look on euro zone debt crisis: [ID:nLDE68T0MG]

Scenarios on euro zone crisis: [ID:nLDE6B50PA]

Graphics package on Europe’s struggle with debt: PDF on yuan offshore market:

Mark McCormick, currency strategist at Brown Brothers
Harriman in New York, said the euro is also at risk of dropping
if China decides to implement a rate cut over the weekend.
(Additional reporting by Julie Haviv, Gertrude Chavez-Dreyfuss
and Steven C. Johnson; Editing by James Dalgleish)

REFILE-FOREX-US dollar gains broadly as Treasury yields spike