FOREX-Dollar extends rebound as U.S. yields climb

* USD extends rebound from near 3-year low
* Bitcoin falls 19% to face biggest one-day drop since March

(New throughout, updates prices, market activity, comments to
U.S. market open; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Jan 11 (Reuters) - The dollar edged higher across
the board on Monday, extending a rebound from the near 3-year
low hit last week, taking strength from the recent spike in
Treasury yields and the prospect of a growth boost from higher
U.S. fiscal stimulus.
U.S. President-elect Joe Biden, who takes office on Jan. 20
with Democrats able to control both houses of Congress, has
promised "trillions" in extra pandemic-relief spending.
Ordinarily, the extra spending plans would force investors
to worry about rising inflation and its detrimental effect on
the U.S. dollar in a weak economy, but the currency has been
supported in recent weeks thanks to rising U.S. yields.
U.S. government bond yields have logged big moves in recent
sessions, with the Treasury yield curve experiencing a
significant increase in yields in longer-dated bonds.
Benchmark Treasury yields rose to 10-month highs on Monday
as investors priced for higher government spending under the
incoming Joe Biden administration and before the Treasury will
sell new long-dated supply. At 99 basis points, the spread between the 2-year and
10-year Treasury yield is at its steepest since July 2017.
US2US10=TWEB .
The U.S. dollar index =USD was 0.4% higher at 90.636, it's
fourth straight session of gains. The index fell as low as 89.21
last weak, its weakest since March 2018.
"Recent drivers of USD softness - rising commodities,
stronger stocks and lower yields are moderating at least but
whether we see a wholesale reversal in these trends remains to
be seen," Shaun Osborne, chief currency strategist at
Scotiabank, said in a note.
"While the USD may catch a bid on position-adjustment or
profit-taking after its recent weakness, a sustained recovery
will have to be accompanied by either a clear improvement in
recent yield trends or a positive US growth shock," Osborne
said.
Speculators in the FX market remain extremely bearish on the
dollar, U.S. Commodity Futures Trading Commission data released
on Friday, showed.
The stronger dollar took a bite out of the pound, with the
British currency down 0.7%, as Britain's chief medical adviser
warned that the next few weeks of the pandemic will be the worst
yet. Meanwhile, bitcoin plunged nearly 20% to a one-week low on
Monday before paring losses, putting the cryptocurrency on track
for its biggest one-day drop since March as its recent red-hot
rally faltered. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC: US real yields and euro https://tmsnrt.rs/2LbvJA7
GRAPHIC: World FX rates in 2021 https://tmsnrt.rs/2RBWI5E
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