FOREX-Dollar strengthens, wiping out weekly loss, as U.S. Treasury yields rise again

* Dollar index up 0.5%, reversing week’s losses

* Aussie down 0.7%

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E (Updates prices, adds comment and chart)

By Elizabeth Howcroft

LONDON, March 12 (Reuters) – A fresh spike in U.S. Treasury yields sparked a risk-off move in global currency markets on Friday, with the dollar reversing its fall from earlier in the week and riskier currencies taking a hit.

Market participants have grown wary in recent weeks that there could be a spike in inflation caused by massive fiscal stimulus and pent-up consumer demand when economies reopen from coronavirus lockdowns.

Although soft U.S. CPI data on Wednesday went some way to calm those fears, U.S. Treasuries sold off again on Friday, with the 10-year yield rising above 1.6%.

The dollar was up 0.5% on the day at 91.907 by 1149 GMT, and on track to end the week little changed overall having failed to regain Tuesday’s peak of 92.506, which was its strongest since November.

“There is concern over inflation in the months ahead and that sense is dollar-supportive,” said Neil Jones, head of FX sales at Mizuho.

“It looks like pretty upbeat in the United States in terms of rollout of further vaccine plays, and of course that feeds into the economic recovery in the States, and a time when fiscal stimulus is extremely high, monetary stimulus is extremely high,” he said.

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