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[1/2] British Pound and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. The dollar index, which tracks the greenback against six main peers, was down 0.14% at 102.29, having reached 102.75 in early trading on Monday, its highest since April 10. "With all of that, do you really want to buy a lot of risky assets this year?" The weak Chinese data was also weighing on the Australian dollar which dropped as much as 0.5% to $0.6665. The dollar also gained on China's offshore yuan , rising to as much as 6.981, its highest since March 10.

[1/2] British Pound and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. Broader factors are also weighing on the pound as well, said Jane Foley, head of FX strategy at Rabobank: "A lot of the better news for sterling is already in the price. "With all of that, do you really want to buy a lot of risky assets this year?" The weak Chinese data was also weighing on the Australian dollar which dropped as much as 0.5% to $0.6665. The dollar also gained on China's offshore yuan , rising to as much as 6.9795, its highest since March 10.

TOKYO, April 19 (Reuters) - Data showing British inflation stayed above 10% in March meant the pound climbed against the dollar while other currencies dipped, with the greenback underpinned by a tick-up in U.S. yields. Sterling was last 0.25% higher at $1.2454, heading back to last week's 10-month high, after data showed British consumer price inflation eased by less than expected in March to 10.1% from February's 10.4%. However, he added: "With the Fed expected to hike in May and the ECB to hike by more over the coming months, the positive impetus from this data for the pound will likely be contained." Expectations for higher official rates in a market relative to those elsewhere typically drag money market and government bond yields higher, attracting cash into a country while boosting its currency. "It's the volatility in the bond market that's driving the dollar, not the other way round."

The euro was up 0.52% at $1.0918 and the pound rose a similar amount to $1.2439 as most European markets returned from the long Easter weekend. "Bank earnings will also be important, they don't often reach across to FX markets directly, but they might, given the recent jitters," Foley added. Tuesday's moves were also affected by European markets' reopening after the break, said Simon Harvey, head of FX analysis at Monex Europe, given the limited liquidity on Friday and Monday with most European markets closed. He said algorithms trading currencies based on the difference between European and U.S. rates might have sold euros for dollars when U.S. Treasury yields rose after the jobs data while European bond markets were closed. European bond yields rose sharply on Tuesday, catching up after the break.

The euro was up 0.4% at $1.0903 and the pound was up 0.5% at $1.2439 as most European markets returned from the long Easter weekend. "Bank earnings will also be important, they don't often reach across to FX markets directly, but they might given the recent jitters," Foley added. Tuesday's moves were also affected by European markets' reopening after the break, said Simon Harvey, head of FX analysis at Monex Europe, given the limited liquidity on Friday and Monday with most European markets closed. He said algorithms trading currencies based on the difference between European and U.S. rates might have sold euros for dollars when U.S. Treasury yields rose after the jobs data while European bond markets were closed. European bond yields rose sharply on Tuesday catching up after the break.

Markets are anticipating a potential slowdown in the pace of Fed hiking," said Lee Hardman a currency analyst at MUFG. The aggressive pace of Fed tightening has sent the dollar higher. Traders and economists predict another 75 basis point increase next Wednesday, but there is a growing view that it will slow to half a point in December. The benchmark 10-year U.S. Treasury yield continued its descent from last week's multi-year high of 4.338%, and was last down seven basis points at 4.038%. That would be the second consecutive reduction in the size of rate rises after a 100 basis point move in July and 75 basis points last month.

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