RTRS: Dollar draws support from US yields, euro vulnerable
* Dollar hits 6-wk high vs euro then retreats
* Previous day's jump in Treasury yields supports dollar
* But comments from Fed's Dudley see it lose a bit of ground
* Still, greenback above 55-day MA vs yen and Swiss franc
By Masayuki Kitano
TOKYO, Nov 16 (Reuters) - The dollar touched a six-week high against the euro on Tuesday, supported by a rise in U.S. Treasury yields, but later retreated as officials from the Federal Reserve sounded a dovish tone and defended its easing policy.
The 10-year U.S. Treasury yield jumped about 17 basis points on Monday and hit a three-month high near 2.97 percent US10YT=RR, helping give a broad lift to the greenback.
The dollar index, which measures the dollar's value against a basket of currencies, hit a six-week high of 78.744 .DXY earlier and the euro, also pressured by concerns over euro zone debt, touched a six-week trough of $1.3560 EUR=.
But the euro later recovered some ground to $1.3612, rising 0.2 percent on the day, as New York Fed President William Dudley said the need to exit from current policies could be "years away", following up dovish remarks from Fed vice chairwoman Janet Yellen. [ID:nN15280144] [ID:nN15286188]
Their comments may have been aimed at tempering the recent rise in Treasury yields, as well as countering criticism of the quantitative easing policy, said Koji Fukaya, chief currency strategist at Credit Suisse in Tokyo.
"It would be problematic if long-term interest rates rise and equities pull back," he said.
"Whether it was the depth or the speed of the correction, the aim is probably to calm that down a bit."
The euro bounced back after dipping to just below its 55-day moving average, now at $1.3567, and the top of the cloud on daily ichimoku charts at $1.3565.
A trader for a major Japanese bank said it was also supported by talk of buying on dips by Asian players and after its drop stalled right near those support levels.
But it remains vulnerable due to the potential for more short-covering in the dollar as the year-end approaches and as uncertainty persists over whether Ireland will go for a state bailout.
Downside targets include $1.3463, a 50 percent retracement of the euro's September-November rally, and $1.3364, a 38.2 percent retracement of its June-November rally.
