Dollar hits 11-month high versus yen, euro slips

The dollar hit an 11-month high against the yen and hovered near a seven-week high versus a basket of currencies on Tuesday, backed by expectations of a US economic revival. The dollar recouped knee-jerk losses against the yen made after the Bank of Japan stopped short of taking aggressive easing steps on Tuesday. That wrongfooted investors who had bet on a repeat of the central bank\'s surprise easing last month. The greenback is being supported by signs of improvement in the world\'s biggest economy. Data last Friday showed February was the third straight month to record a gain of more than 200,000 jobs. The dollar index stood at 80.008, not far from a high of 80.132 struck on Monday, its highest in seven weeks. Analysts say that with the Fed unlikely to be in a hurry to announce fresh measures, given that its $400 billion stimulus programme known as Operation Twist, is in play, the focus would be on retail sales for February. Retail sales are expected to reflect solid car and gasoline sales and are likely to push the dollar higher, especially against the yen. \"There is an upside risk to US retail sales data, given the underperformance seen last month. That should give reasonable support to the dollar against the yen,\" said Steve Barrow, head of G10 currency research at Standard Bank. The dollar rose to 82.795 yen on trading platform EBS after stop loss buy orders were triggered above Friday\'s high of 82.65. Traders reported option structures at 83.00 which were attracting protective dollar sell orders. A break above 83.00 would expose resistance at 83.11 yen, the 76.4 percent retracement of the dollar\'s decline from April to a record low in October last year. The yen\'s losses have gathered pace since the surprise BoJ easing and there were some expectations it might have acted again on Tuesday. \"Speculators were positioning for more aggressive easing from the BOJ and so far those expectations have been disappointed,\" said Lee Hardman, currency strategist at BTM-UFJ. \"We expect the dollar to outperform generally but against the yen it looks to have come too far in the short-term.\" Dealers said a widening in the spread between two-year US government bond yields and their Japanese equivalents was helping to support dollar/yen. The premium in favour of US yields was last at 21.4 basis points, the highest since August 2011. The spread is closely correlated with dollar/yen. The dollar\'s strength saw the euro ease and move closer towards a one-month low struck on Monday. The common currency is still smarting from fears the European debt crisis could worsen, despite Greece\'s success in securing a debt-cutting swap deal. The euro was down at 0.3 percent on the day at $1.3115 , not far from a one-month low of $1.3079. Technical support for the euro is at its daily Ichimoku cloud top at $1.3087 and the 55-day moving average around $1.3081. The currency\'s outlook remains shaky given that the euro zone economy is slipping into recession, in contrast with a brightening picture in the United States.