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SINGAPORE, May 15, 2010 (FBC) The US dollar rose against its major peers for five weeks after posting its biggest weekly gain since September as the safe-haven currency benefited from domestic inflation and growth concerns.

The Turkish lira fell to a two-month low after the weekend election, while the Thai baht rallied about 1% after Thailand’s opposition military-allied parties won the weekend election.

The greenback was buoyed by a rise in Treasury yields following the Federal Reserve’s rate hike next month, which pushed US consumers’ long-term inflation expectations to their highest level since 2011.

Traders currently put those odds at 13% zero to zero before the University of Michigan election. However, there are still up to three quarter-point discounts that will enter the market at the end of the year.

Joseph Capurso, head of international economics at the Commonwealth Bank of Australia (CBA), said in a client note: “Too many FOMC (Fed) rate cuts are worth the near term in our view.”

He added: “We recognize that there are signs that the US labor market is slowing and inflation is slowing.” But still high inflation and a tight labor market also point to a significant slowdown in the near term.

China, for its part, is under renewed concern about a global slowdown after a string of disappointing economic data, including imports and inflation, led to strong domestic demand. More evidence could come from Tuesday’s retail sales report.

The Chinese yuan fell to 6.9740 against the dollar in offshore trade on Monday before recovering slightly to 6.9694.

The People’s Bank of China kept the seven-day inverse rate unchanged at 2 percent.

The dollar index, which measures the currency against six major peers, hit 102.75 in early Asian trade for the first time since April 10. Then slightly to 102.63. It was up 1.4% last week.

The US dollar is oversold and the dollar index should move towards the CBA end-June target of 104 this week, Capurso said.

The 10-year Treasury yield was little changed in Tokyo, hovering around 3.47%.

That has put pressure on the yen, which is moving inversely to US long-term yields. The Japanese currency was lower at $136.03, down from $135.80 earlier in the market.

The euro rose 0.11% to $1.08605 after touching a fresh five-week low of $1.08445 earlier in the session.

Earlier, the dollar was up 0.31% at 19.64 Turkish lira after jumping to 19.70 for the first time since March 10.

Turkey headed to the second round of elections, with President Tayyip Erdoğan taking a bigger than expected lead over his rival but failing to secure an outright majority.

The U.S. currency sank 0.65% to 33.76 baht in offshore Thai trade, and was earlier down as much as 0.92%.

Thailand’s opposition parties won a landslide election on Sunday, but it was uncertain whether they would be able to form the next government, whose parliamentary laws were written by the military junta.

Editing by Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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