Dollar falls as traders cautious on next move

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Dollar falls as traders cautious on next move

Norwegian crown fell after cenbank sticks to plan Adds latest prices, details on Norwegian crown LONDON, January 20, Reuters -- The dollar fell on Thursday as the U.S. Treasury yields slowed, while the Canadian and Australian dollars gained on the back of rising commodity prices and optimism about economic growth.

The euro and sterling went up after the dollar was lifted by a surge in the US Treasury yields after suffering their worst days in a month on Tuesday.

However, by 1100 GMT the initial gains had fizzled with investors cautious about the next move in government bond yields.

The European single currency was last at $1.1346, up slightly on the day and below an earlier high of $1.1369.

The pound was up 0.1% at $1.3622 and the yen was down marginally 114.26 per dollar.

The dollar index, which measures the dollar against six major peers, was 0.1% lower on the session, at 95.563.

The dollar has not performed as well as expected recently, despite a surge in expectations for the U.S. Federal Reserve to hike interest rates early in March to curb soaring inflation.

The U.S. benchmark 10 year note yields were at 1.8379%, a two-year high of 1.902% reached on Wednesday.

The gains come as traders prepare for the United States to tighten monetary policy at a faster pace than previously thought. In March, the Fed funds futures have priced in a rate hike and four in all for 2022.

The Aussie and the Loonie were supported by a combination of higher commodity prices and expectations for tighter policy.

The Aussie rose 0.4% to $0.7237, extending advances from the previous day, and the Canadian dollar was heading back towards the 10 week high it touched on Wednesday, with one U.S. dollar worth C $1.2493.

The Aussie was helped by a strong Australian labour market reading overnight, according to analysts.

The expectation of the RBA Reserve Bank of Australia to end the QE quantitative easing programme at their next policy meeting on 1 February has reinforced expectations, according to MUFG analyst Lee Hardman.

Hardman noted that the Canadian dollar has been the best performing G 10 currency in 2022, attributing that to a rebound in oil prices which have hit seven-year highs and speculation that the Bank of Canada will hike rates.

The Norwegian crown, a currency linked to the price of oil, fell after the central bank decided to keep interest rates on hold at 0.5% and said it was on track for a March hike. Some traders were worried that it would flag a faster rate of tightening.

The crown was down 0.2% against the euro and dollar at the end of the day.