Dollar holds firm as U.S. stocks plummet

By Gertrude Chavez-Dreyfuss and Richard Leong

NEW YORK (Reuters) - The dollar was little changed on Thursday against a basket of currencies in choppy trading, fading from a two-week high as investors reduced bets against the greenback on renewed turbulence in the stock and bond markets.

The dollar's loss of upward momentum reinforced the view the currency is in a bear market trend.

A sell-off across global stock markets since late Friday, and bets that the United States could see at least three interest rate hikes in 2018 due to improving U.S. fundamentals have propelled the dollar in recent days.

Yet the dollar lagged against the yen and Swiss franc as investors sought safety on a day when Wall Street suffered steep losses and the U.S. 10-year Treasury yield flirted with four-year highs.

"You have a split in flight-to-safety bids when you have turbulent financial markets regardless of how well the global economy is doing," said Jason Leinwand, chief executive officer of FirstLine FX Currency Strategy in Randolph, New Jersey.

The index that tracks the dollar versus six currencies <.DXY> was marginally higher at 90.292. It has gained 1.2 percent since last Friday, putting it on track for its largest weekly gain since late October.

John Taylor, Jr., president and founder of global macro and FX research firm Taylor Global Vision was not too convinced about the dollar's strength for most of this week.

"The bounce in the dollar is already nearing an end. The feeble move higher in dollar pairs like the dollar/Mexican peso and the dollar/South African rand highlights the distaste for the U.S. currency," he added.

This belief ties in with a Reuters poll of strategists who said the dollar's rebound was unlikely to be sustainable.

The euro was down 0.1 percent at $1.2248 , after earlier falling to a two-week low. The single currency has declined 2.6 percent since hitting a three-year high of around $1.2536 just 10 days ago.

"The market is in consolidation mode," said Commerzbank currency strategist Esther Reichelt in Frankfurt. "The dollar performed relatively well during the stock market turmoil, and this experience determined the market sentiment going forward."

Traditional safe-havens such as the yen and Swiss franc, meanwhile, have seen only modest gains during the recent stock market volatility. But on Thursday, the dollar was both down 0.8 percent and 0.6 percent against the Swiss franc and yen , respectively.

Higher U.S. yields also underpinned the greenback's recent rally. The 10-year Treasury yield edged up to 2.833 percent, not far below a four-year peak of 2.885 percent reached on Monday.

(Additional reporting by Gertrude Chavez-Dreyfuss in New York; Jemima Kelly in London; Editing by Andrew Hay and Diane Craft)

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