* 10-year U.S. yield unable to reach 3.60 pct, backtracks
to 3.44
* This December is typical for markets: messy and trendless
* Advanced market stocks outperforming emerging in quarter
By Kevin Plumberg
HONG KONG, Dec 17 (Reuters) - The U.S. dollar fell on
Friday, struggling for support as a rapid rise in U.S. bond
yields ebbed, while Asian stocks rose after two days of
declines.
Benchmark 10-year U.S. Treasury yields held at 3.44
percent in Asia after a push overnight towards a seven-month
high close to 3.6 percent enticed bond buyers back into the
market, confounding investors hoping for a trend to cling to
in the final weeks of 2010.
December's reduced trading volumes and holidays typically
cause whippy price action and make big bets difficult to hold
for long.
Still, stocks in advanced markets were poised to keep a
year-end rally going, even though Japanese equities were
slipping in early action.
The Nikkei share average edged down 0.1 percent
but was still up 10 percent in the final quarter of the year.
It was on course for the biggest quarterly rise since the June
quarter of 2009, lifted by foreign investors hoovering up
cheap shares.
Japan's gains have contributed to the 6.7 percent rise of
the MSCI all-country world index that exceeded
the 3.8 percent advance of the emerging markets index .
The outperformance of developed markets has been a
reversal of a trend in place for most of the year: the
fundamental strength of emerging markets drawing money from
advanced economies.
That is not to say the outlook for emerging markets,
particularly in Asia, is anything but bright.
"Loose monetary policy in the U.S., debt concerns in
Europe and strong growth in Asia coupled with rising
inflationary pressures should maintain the status quo of Asian
currency strength in 2011," Commerzbank analysts said in a note.
For now though clear signs of improvement in the U.S.
economic outlook has taken some gloss off of developing markets.
After two days of falls, the MSCI index of Asia Pacific
stocks outside Japan rose 0.4 percent on
Friday, with gains evenly spread across the sectors.
Ten-year U.S. Treasury futures expiring in March 2011 were
up 10/32 <TYc2> after a late session rally overnight in the
cash market.
The 10-year yield of 3.44 percent was unchanged from late
New York, but down from a 7-month high of 3.57 percent reached
on Thursday.
The U.S. dollar index, a measure of performance against
six other currencies, slipped 0.2 percent . Despite a 63
basis point rise in 10-year Treasury yields during December,
the dollar index is down 1.6 percent this month.
Citi, one of the biggest private participants in the
foreign exchange market, still recommends betting tactically
on the dollar versus the euro based on risks surrounding an
Irish election early next year.
"European policymakers have proved as adept at snatching
victory out of the jaws of defeat, as they are at snatching
defeat out of the jaws of victory," Steven Englander, global
head of G10 FX strategy for Citi in New York, said in a note.
"The lack of liquidity as year end approaches and the
difficulties in coming up with comprehensive solutions on the
sovereign debt make us prefer euro short to long for the time
being."
