Dollar strengthens in London

The dollar was well supported against the yen on Tuesday after hitting a two-month high earlier as US bond yields surged on expectations for US economic growth. The euro trimmed gains against the dollar after US ratings firm Moody's cut Greece's rating by one notch to A2 from A1.
Expectations for stronger US growth boosted US Treasury yields and further widened the spread between short-term US and Japanese government bond yields, providing an impetus for traders to bid up the dollar against the yen. The spread between the yields on the US two-year note and Japan's two-year bond has widened to about 70 basis points from 48 bps at the start of the month.
"With the dollar showing signs of life, expect carry trade funding to switch to the yen," said Chris Turner, head of FX strategy at ING. By 1206 GMT, the dollar was up 0.2 percent at 91.38 yen after touching 91.49 yen on trading platform EBS, its strongest since late October. The upside was capped by Japanese exporter offers, as well as options-related offers also seen around 91.50 yen, traders said.
Traders will keep an eye on a final estimate of third quarter US gross domestic product due at 1330 GMT, likely to confirm an annual 2.8 percent growth rate. Of greater interest may be US existing home sales for November at 1500 GMT. "The test is whether the dollar continues to capitalise on positive signals from the US economy," Daragh Maher, deputy head of global FX at Calyon, said in a note.
EURO TRIMS GAINS AFTER GREECE The dollar index, a measure of its performance against six other major currencies, was flat at 78.049, nearing a high of more than three months at 78.144 hit on Monday. Concerns about the problems surrounding peripheral euro zone countries had weighed on the euro, and particularly Greece, whose sovereign debt rating was downgraded by Fitch Ratings and Standard & Poor's earlier this month.
"This will continue to be a big structural negative for the euro that will remain in place over the medium term," he said. The euro dipped 20 ticks to around $1.4302 after Moody's announcement. It was last flat on the day at $1.4294. Sterling slipped to a two-month low below $1.6000 after third quarter UK gross domestic product was revised up less than expected to a 0.2 percent contraction. Sterling was last down 0.1 percent at $1.6026.