FOREX-Dollar buoyed by yields surge jump after Fed's inflation shift

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Eimi Yamamitsu
TOKYO, Aug 28 (Reuters) - The dollar held gains against
major currencies on Friday, after the Federal Reserve's
aggressive new strategy to lift employment and increased
tolerance for higher inflation pushed U.S. bond yields up.
The dollar's index rose against six major currencies =USD
and was last trading at 93.061, turning around a sharp decline
seen on Thursday.
Speaking at the Fed's Jackson Hole symposium, which was held
virtually this year, Chair Jerome Powell said the central bank
will seek to achieve 2% inflation on average, so that periods of
super-low inflation would likely be followed by an effort to
lift inflation "moderately above 2% for some time," and to
ensure economic recovery and job creation. Following Powell's comments, the dollar initially fell
sharply against the yen and the euro, but reversed as
longer-term U.S. Treasury yields bounced back to their highest
levels in months.
"Since FOMC meeting in June, the treasury yields have
declined and the dollar fell, but I think that will not be the
case for the time being, especially after the Fed's speech. The
market is more likely to see higher treasury yields," said
Masafumi Yamamoto, chief currency strategist at Mizuho
Securities in Tokyo.
The benchmark 10-year US10YT=RR yield, which rises when
bond prices fall, rose to 0.7700% in Asian trade, a level unseen
since June 16.
"It's clear we saw a 'buy the rumour, sell the fact' play
out, notably in U.S. Treasuries, which have led broad market
moves," said Chris Weston, Head of Research at brokerage
Pepperstone in Melbourne.
"The move higher in Treasury yields post-Powell did promote
a USD rally, although we find it flat on the day, with a mixed
picture across the well-traded FX pairs."
The euro changed hands at $1.18155 EUR= , after almost
hitting last week's low of $1.17545 overnight.
The greenback rose to 106.695 JPY=EBS against the
safe-haven yen, edging near this month's high of 107.05.
Traders in the yen now shift their focus to Japanese Prime
Minister Shinzo Abe's news conference later in the day, amid
growing concerns over his health.
Ruling party officials have said Abe's health is fine, but
his recent hospital visits, one of which ran nearly eight hours,
have fanned speculation whether he will be able to continue in
the job until the end of his term in September 2021.
The offshore yuan stood at 6.8819 per dollar CNH= .
The British pound was little changed at $1.3193 GBP=D3 ,
after hitting its highest since Dec. 31 of $1.3284 on Powell's
comments.
The Australian dollar AUD=D3 was changing hands at $0.7264
AUD=D3 , while the kiwi NZD=D3 stood at $0.6643 per dollar.