Dollar hits peaks in London

The dollar rose to a 4-1/2 year high against the yen and 11-week peak versus the euro on Wednesday after a rally in US Treasury yields drew investors towards the greenback. Markets were also awaiting US retail sales data, the Federal Reserve Beige Book and speeches from Fed officials, having ditched expectations of lower US interest rates later this year.
"Bond yields and asset markets in general are playing a major role in what's going on. A break higher (in US 10-year Treasury yields) suggests yields heading even higher so the dollar is picking up support," BNP Paribas senior currency strategist Ian Stannard said.
"If we start to see a simultaneous sell-off in equity markets, and they do seem to be under pressure, we could see this turning into a broader risk aversion story," he said. By 1116 GMT, the dollar was up almost 0.6 percent at 122.33 yen, having hit a 4-1/2 year peak of 122.48. The euro was up 0.3 percent at 162.39 yen but had fallen to $1.3264, its weakest since late March.
Earlier, the benchmark US 10-year yield hit five-year highs of 5.33 percent. The Swiss franc fell to a four-month low of 1.2469 per dollar before an interest rate decision by the Swiss National Bank on Thursday. The SNB is expected to raise rates.
The New Zealand dollar steadied around US $0.7480, after unprecedented but short-lived intervention from the central bank on Monday knocked it off last week's 22-year high near $0.7640.
New York Fed President Timothy Geithner, Fed Board Governor Randall Kroszner and Dallas Fed President Richard Fisher are due to speak later on Wednesday and the Fed will release its Beige Book on regional economic conditions at 1800 GMT. US retail sales, due at 1230 GMT, are forecast up 0.6 percent month-on-month in May, having dropped 0.2 percent in April.
Investors are also likely to take a cue from the US Treasury Department's semi-annual report on currency practices of foreign trading partners. Before release of the report, the top Democrat and Republican on the Senate Banking Committee said on Tuesday they would introduce legislation giving the Treasury Department stronger tools to confront China's currency practices.
The US Treasury Department has pushed China to move to a more flexible market-oriented exchange rate policy, but has frustrated many lawmakers and manufacturers by refusing to label China as a currency manipulator.
"I don't expect China to be cited in the report as a currency manipulator but there's an outside chance that it could happen. If that does happen then in theory you could see the dollar weakening in some areas," said Peter Frank, senior FX strategist at ABN Amro. Chinese Premier Wen Jiabao said on Wednesday that China will take measures to keep its economy from overheating.