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Dollar hovers at 11-month high after upbeat US data

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The dollar held near an 11-month high against a basket of currencies on Tuesday as some stability returned to the U.S. bond market following a vicious sell-off, helped by unexpectedly strong data on U.S. October retail sales.

An early pause in the surge in U.S. yields stemming from Donald Trump's U.S. presidential win spurred traders to scale back their dollar holdings. Then the encouraging retail sales figures revived some selling in bonds and reinforced the notion the Federal Reserve would raise interest rates in December, which helped reverse the greenback's losses.


"It's a strong retail sales number. The dollar picked up a bit on the data," said Brian Daingerfield, macro strategist at RBS Securities in Stamford, Connecticut.

The Commerce Department said domestic retail sales rose 0.8 percent last month, exceeding the 0.6 percent gain forecast of economists polled by Reuters.

The dollar index, which measures the greenback against six major currencies, was little changed at 100.06 after rising to 100.25 shortly after the retail sales report. It was as low as 99.45 earlier as U.S. yields were unchanged to lower.

The yield on two-year Treasuries rose to 1.029 percent, the highest since early January.

The dollar's rise moved in step with the surge in U.S. yields as Trump's victory a week ago led traders to pile on bets he and a Republican-controlled Congress would embark on tax cuts and federal spending to boost the economy.

However, they could be offset by possible restrictions on immigration and trade, which could hurt business activity, analysts say.

"We don't know whether and in what form Trump will follow through on what he campaigned on," said James Chen, head of research at Gain Capital in Bedminster, New Jersey.

Having hit an 11-month low of $1.0709 on Monday, the euro was up 0.1 percent to $1.0743.

The dollar was up 0.3 percent at 108.79 yen after advancing to a 5-1/2 month peak at 108.96 yen earlier Tuesday.

The rise in implied volatilities on currency pairs such as euro/dollar and dollar/yen suggested caution over a sudden fall in the greenback despite its spectacular gains since last week, said Kazushige Kaida, head of forex trading at State Street in Tokyo.

The onshore Chinese yuan fell to its weakest level in nearly eight years, breaking through 6.85 per dollar.