Dollar catches its breath after scaling 14-year peak

                            

The dollar caught its breath in early Asian trading on Thursday, after charging to a 14-year high against a basket of currencies on bets the Trump administration will adopt inflationary policies.

The dollar index, which tracks the greenback against six major rival currencies, retreated 0.2 percent to 100.260 .DXY, after climbing as high as 100.57 on Wednesday, its loftiest peak since April 2003.

The dollar also slipped 0.2 percent against the yen to 108.86 yen JPY= after notching a high of 109.76 overnight, its highest since June 1. JPY=

"It seems that U.S. rates aren't rising as fast as they have the past week, so it seems the dollar's strength and the rise of U.S. rates are taking a pause," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"Japanese rates are also rising, so this is shrinking the gap between U.S. and Japanese rates, especially the two-year tenor," he said. "So as long as the BOJ doesn't show any strong intention to cap the rise of the Japanese yield curve, or if it is actually flattening, then this will cause further downward pressure on the dollar/yen."

On Wednesday, the yield on two-year Japanese government bonds, while still in negative territory, rose to minus 0.095 percent JP2YTN=JBTC, its highest level since early February.

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