BUZZ-COMMENT-US recap: EUR/USD rises as dollar slumps to two-month low

Feb 20 (Reuters) - Dollar index fell to a two-month low on Thursday as narrowing U.S.-Japan yield differentials helped propel the yen to a year-to-date high, while short-covering ahead of European PMI data on Friday and German elections over the weekend buoyed the euro.

Treasury yields eased following a batch of soft U.S. data and comments by Fed speakers. Chicago Federal Reserve President Austan Goolsbee said he does not expect PCE, the U.S central bank’s preferred inflation gage, to be as "sobering" as the recently reported CPI. St. Louis Fed President Alberto Musalem noted stagflation risks in remarks to the Economic Club of New York and potential policy difficulties that scenario would present.

Thursday slide in the dollar index sent it beneath its 100-day moving average for the first time since October.

EUR/USD rose 0.6%, extending earlier gains after President Volodymyr Zelenskiy said, following a meeting with U.S envoy Keith Kellogg, that the country is ready for strong and useful agreement with the U.S. on investments and security.

Euro may rise further if additional short-covering follows German election results, and the pair holds above its 21-day moving average at 1.0413.

Broad dollar losses lifted GBP/USD to a two-month high, leaving the pair to test its nearby 100-day moving average at 1.2659 and upper Bollinger Band. Attention turns to U.K. retail sales data on Friday.

USD/JPY slumped over 1% to a new year-to-date low of 149.40 amid model and speculative sales, finding support at its August 15 high. U.S.- Japan yield differentials and Bank of Japan rate hike expectations continue to drive the pair, though gains in the offshore yuan and equity market weakness were also cited as contributing factors on Thursday. Focus now turns to Japan CPI and PMI data on Friday.

Treasury yields fell 1 to 4 basis points. The 2s-10s curve was down about 2 basis points to +23.2bps.

The S&P 500 fell 0.7% amid weakness in financials and consumer shares.

Oil prices rose 1% after a draw in U.S. distillates and as worries about Russian supply disruptions persist.

Gold rose 0.2%, reaching a fresh record, while copper gained 1.15% as the dollar weakened

Heading toward the close: EUR/USD +0.68%, USD/JPY -1.15%, GBP/USD +0.56%, AUD/USD +0.85%, DXY -0.70%, EUR/JPY -0.47%, GBP/JPY -0.61%, AUD/JPY -0.30%.

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