Dollar up for a third day as yields rise; pound falls

LONDON (Reuters) – The dollar rose for a third consecutive day on Wednesday as U.S. Treasury yields rose before a Federal Reserve meeting where it is widely expected to raise interest rates for the fourth time this year.

U.S. interest rates may be nearing a peak, but relative interest rate differentials still offered some support for the dollar index, which rose 0.02 percent to 97.41 .DXY

The dollar also got some help from reports China was considering cutting import tariffs on American-made cars to 15 percent from the current 40 percent and that a Canadian court granted bail to a top executive of China’s Huawei Technologies HWT.UL and

“Investor confidence is building on the U.S.-China trade front, and this has helped risk assets perform better today,” said Stephen Innes, head of APAC trading at OANDA, a broker.

However, market moves were restrained, with gauges of risk appetite such as the Australian dollar AUD=D3 and the euro/Swiss franc EURCHF= little changed.

Sterling was the biggest loser, dropping below $1.25, after lawmakers triggered a no-confidence vote against British Prime Minister Theresa May on Wednesday .

China’s yuan gained in offshore trade CNH=D3 to 6.886 against the dollar, extending gains from the previous day. The yuan strengthened on Tuesday on news that Beijing and Washington were discussing the next steps in their trade talks.

The 10-year Treasury note yield US10YT=RR inched up to 2.886 percent, continuing to pull back from recent lows.

The yield had dropped to a three-month low of 2.825 percent at the start of the week, with dovish comments from Fed officials and soft U.S. data reinforcing views of a slowdown in rate increases.

Against the Japanese yen, the dollar was broadly steady at 113.445 JPY= after touching a one-week peak of 113.52.

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