Early trade in New York: Dollar touches seven-week high, Italy worries weigh on euro

The dollar rose on Tuesday, boosted by rising US bond yields to a seven-week peak against a basket of currencies, as the euro weakened further on worries about the tension between the European Union and Italy over that country's budget.
The Chinese yuan steadied near a seven-week low against the greenback as a liquidity squeeze in the offshore yuan market in Hong Kong helped stabilize sentiment. "The rise in US yields is much more important" to the day's foreign exchange trading than Italy's fiscal problems, said Thomas Flury, head of currency strategy at UBS Global Wealth Management's Chief Investment Office in Zurich. "The market needs to digest this to see whether it's a long-term spike."
Investors dumped US bonds last week on fears that domestic inflation might accelerate, prompting the Federal Reserve to hasten the pace of interest rate hikes. On Tuesday, the benchmark 10-year Treasury yield climbed to a seven-year high at 3.261 percent before receding a tad.
An index that tracks the dollar versus six major currencies was up 0.08 percent at 95.839 after hitting a seven-week peak at 96.155. Sparring between Washington and Beijing on trade and Italy's proposed hefty debt target have stoked worries about slowing global growth, feeding safe-haven demand for the dollar. The International Monetary Fund on Tuesday reduced its global growth forecasts for 2018 and 2019 to 3.7 percent from 3.9 percent for both years.
The euro fell to a seven-week low of 1.14325. It was last at 1.14850, down 0.05 percent. The single currency was down -0.01 percent at 130.130 yen. The Indian rupee fell to an all-time low of 74.395 per dollar. The Chinese offshore yuan fell to 6.9350 yuan per dollar before retracing to 6.9239, which was marginally weaker on the day.