FOREX-Dollar rises on Treasury yield spike with world awash in stimulus

* Dollar index up 0.53%
* U.S. PPI annual gain largest in nearly 2-1/2 years
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(Adds details of U.S. PPI data, analyst's comments, updates
prices, changes dateline)
By John McCrank
NEW YORK, March 12 (Reuters) - The dollar rose on Friday as
a fresh spike in Treasury yields reignited inflation fears and
sparked a sell-off in riskier assets, allowing the safe haven
greenback to recoup its losses from the prior session.
Market participants have grown wary in recent weeks of a
possible spike in inflation caused by massive fiscal stimulus
and pent-up consumer demand as the pace of vaccinations
increases and economies reopen from coronavirus lockdowns.
Data on Friday showed U.S. producer prices (PPI) had their
largest annual gain in nearly 2-1/2 years, though considerable
slack in the labor market could make it harder for businesses to
pass on the higher costs to consumers.
U.S. President Joe Biden signed a $1.9 trillion stimulus
bill into law on Thursday and urged U.S. states to make all
adults eligible for a coronavirus vaccine by May 1.
Treasuries sold off overnight, with the yield on the
benchmark 10-year note rising above 1.6% to approach the
one-year highs hit last week. The dollar was up 0.53% at 91.928 =USD , retracing its
losses from the prior session and leaving it on track to end the
week little changed overall. The greenback hit 92.506 on
Tuesday, which was its strongest since November.
"Bond yields have been in a very strong uptrend and with the
PPI numbers somewhat higher than consensus, that's contributing
to the rise," said Kathy Lien, managing director at BK Asset
Management.
"That's widely positive for the dollar, as the greenback has
been taking its cues from yields and these new highs are really
encouraging more demand for the greenback, especially at a time
when you have the ECB accelerating bond purchases and being a
little bit more dovish," she said.
The European Central Bank said on Thursday that it would
increase the pace of its money printing to prevent a rise in
euro zone bond yields to support the economic recovery.
Although the euro was down around 0.6% at $1.1918, it was
set for a small weekly gain EUR=EBS .
"The ECB 'holistic' approach to keep financing conditions
favorable is too vague in our view to focus minds and drive the
EUR lower; the U.S. data and the Fed remain the main market
drivers," BofA FX strategists wrote in a note to clients.
Traders will be looking to the U.S. Federal Reserve's policy
meeting next week for any comments about rising yields.
ING strategists wrote in a note to clients that the market
will probably wait until after the Fed's meeting before pushing
the dollar index into 90 and 91 territory.
Riskier currencies lost out on Friday, erasing recent gains.
The Australian dollar - which is seen as a liquid proxy for risk
appetite - fell by 0.71% to 0.77300 versus the U.S. dollar
AUD=D3 .
The New Zealand dollar was down 0.97% against the U.S.
dollar NZD=D3 at 0.7157. The Norwegian crown lost out to both
the euro and dollar.
Dollar-yen was up around 0.55%, changing hands at 109.095
JPY=EBS , close to the 109.235 reached on Tuesday which had
been the yen's weakest since June 2020.
Elsewhere, bitcoin dipped 2.5% to $56,311.83.11, having come
close to, but not exceeded, the recent record high of $58,354.14
BTC=BTSP .

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