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FOREX-Dollar advances to 8-month high versus yen as US yields resume climb

Published 25/11/2016, 02:06 pm
FOREX-Dollar advances to 8-month high versus yen as US yields resume climb
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* Dollar's bull run continues as US yields resume rising

* Dollar index near fresh 13-1/2-year high marked overnight

* Emerging market turmoil seen posing long-term threat to USD run

* Aussie, pound poised for weekly gains vs dollar (Adds details and quotes, updates prices)

By Shinichi Saoshiro and Yuzuha Oka

TOKYO, Nov 25 (Reuters) - The dollar rose to an 8-month high against the yen on Friday as U.S. bond yields resumed their rise in Asia after the Thanksgiving break shut markets in the United States.

The dollar was up 0.3 percent at 113.710 yen JPY= after hitting an 8-month high of 113.900 yen. It was on track to rise 2.5 percent on the week.

The euro nudged up 0.1 percent to $1.0558 EUR= to put a bit of distance between $1.0518, its lowest since March hit in the previous day. The common currency was poised for a 0.3 percent weekly loss.

"We kept expecting the dollar to adjust lower during its bull phase but that has not happened yet, since there has been no real opportunity for selling to take hold," said Shin Kadota, chief Japan FX strategist at Barclays (LON:BARC) in Tokyo.

"How far the dollar can run will be mostly up to how much more U.S. yields can rise," Kadota said, adding that there were not many factors to derail the dollar's momentum for now, though the turmoil in emerging markets needed watching.

Emerging market equities and currencies have been hit hard by the spectre of higher U.S. interest rates and the prospect of U.S. trade protectionism that President-elect Donald Trump had advocated.

The Turkish lira TRY= , for example, slumped to a record low although the country's central bank raised interest rates for the first time in nearly three years on Thursday. The lira was hurt as European Union lawmakers called for a temporary halt to EU membership talks with Ankara. expect a further sell-off in emerging markets to eventually revive demand for the flagging Japanese yen, considered a go-to currency in times of market tumult along with the Swiss franc.

Analysts also pointed to weakened expectations towards the Bank of Japan's monetary easing which until recently had helped the yen depreciate as a factor that bears watching.

"With markets casting doubts on the effectiveness of BOJ's monetary easing, there are less incentives to go short on the yen," said Minori Uchida, chief FX analyst at the Bank of Tokyo Mitsubishi UFJ.

The 10-year U.S. Treasury note yield US10YT=RR rose about 5 basis points to 2.405 percent from the previous close on Wednesday.

The yield rose to 2.417 percent midweek, its highest since July 2015, as the market continued to bet that Trump's administration will increase debt-funded spending and spur higher growth and inflation.

The dollar index was steady at 101.720 .DXY after rising to a 13-1/2-year high of 102.050 overnight. It was enroute for a 0.6 percent gain on the week.

The Australian dollar was up 0.2 percent at $0.7430 AUD=D4 . The Aussie has gained more than 1 percent on the week, holding its own against the dollar thanks in part to a rise in prices of commodities such as iron ore.

Sterling was steady at $1.2446 GBP=D4 and headed for a 0.7 percent gain on the week.

The pound has been lifted this month with investor focus turning away from political risks facing Britain - namely its exit from the European Union - and towards risks elsewhere, particularly in Europe. GBP/

(Editing by Kim Coghill)

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