Dollar appreciates against the yen on higher US bond yields ahead of CPI data

By Alun John

TOKYO/LONDON, Feb 13 (Reuters) – The dollar neared a five-week high against major currencies on Monday, particularly the interest-rate-sensitive yen, as investors bet the Reserve federal government will maintain tight monetary policy for longer an increase in US bond yields.

* These expectations will be challenged or heightened by the main event of the week, Tuesday’s release of US consumer price data.

* The dollar rose 1% to 132.76 yen, closing in on 132.9 last week, the highest level for the US currency against its Japanese counterpart since Jan. 6.

* The euro hit a one-month low at 1.0656 in Asian trade but was last up 0.15% at $1.0693. The pound rose 0.3% to $1.2096, holding not far from last week’s one-month low of $1.1961.

* The dollar index, which compares the greenback to a basket of six major currencies, was flat at 103.55, close to a one-month high of 103.9 last week.

* Rising US Treasury yields were a key driver of the yen’s decline. The yield on the 10-year benchmark paper hit a new six-week high at 3.755% and the yield on the two-year notes was at its highest level since late November at 4.543%.

* Strong US jobs data released earlier in the month suggests the economy is doing well, meaning there is less danger of the Fed keeping rates high.

* Therefore, “this week’s US CPI is one of the most important data in recent memory,” Barclays analysts said in a note. “The dollar rose on the back of… strength in the U.S. labor market, but the evolving narrative will be updated again on Tuesday.”

(Reporting by Kevin Buckland in Tokyo and Alun John in London; Spanish editing by Carlos Serrano)