* A dollar goes back down as yields rise
* Euro / dollar is moving above $ 1.21
* Aussie, Kiwi gain as feeling improves
* Graphic: World FX Levels in 2020 tmsnrt.rs/2RBWI5E (Adds new quota, latest prices, details, card)
LONDON, Jan 12 (Reuters) – The U.S. dollar held on to its recent gains on Tuesday after a spike in U.S. Treasury yields raised demand for the currency.
The dollar had plummeted to a 2-1 / 2-year low in January after slipping for months as an ultra-dovish policy from the Federal Reserve encouraged investors to seek other currencies.
But a wave of incoming Joe Biden-managed spending is expected to push Treasury yields higher, with 10-year yields reaching a 10-month high Tuesday. The dollar has kicked 1.5% since last Wednesday.
Not only have markets pledged a boost in raising Fed interest rates to 2023, many also believe it could begin to pull back, or reduce, asset purchases.
The dollar index, which measures the greenback against a basket of currencies, remained unchanged at 90.438, above the lows of 89.206 that were hit last week.
Against the euro, the dollar stood at $ 1.2153.
The support from rising yields so far has raised concerns that the increased consumption could trigger faster inflation. But many analysts expect the dollar to start declining as stimulus spending and vaccine spreads clear the global economic outlook.
ING analysts said Fed officials who planned to speak later Tuesday were more likely to pour cold water on any proposal to slow down funding incentive support.
“Any policy considerations – in our view – should go towards refusing to remove any financial incentive in the future,” they said.
“With Fed rate expectations firmly at the bottom, any further rise in U.S. output will remain the result of a rise in inflation or a key term, leaving us confident on our bearish-dollar call. ”
Morgan Stanley, however, has suggested a neutral view on the dollar. It has closed bearish-dollar trading against the euro and the Canadian dollar and eroded its bullish outlook on emerging market currencies, partly because real U.S. rates are likely to be “Troughing”.
Most of the market currencies that appeared on Tuesday rose, including the offshore yuan, Mexican peso and South African rand.
With equities markets back in a bullish sentiment, developed market currencies became more risky such as Australian dollars and New Zealand dollars. Both gained around 0.4%
Bitcoin established at around $ 35,500 after the massive fall on Monday. The cryptocurrency rally has slowed since it peaked at $ 42,000 on Jan. 8.
Edited by Larry King and Pravin Char