By Saikat Chatterjee
LONDON (Reuters) - The dollar gained for a second consecutive session on Monday as rising U.S. Treasury yields forced traders to cut their bearish dollar bets to four-month lows.
Benchmark 10-year Treasury yields were trading at 1.6320% on Monday, close to Friday's top of 1.6420%, a level last seen in February. Rising U.S. yields have lifted the greenback in recent weeks thanks to widening interest rate differentials relative to other major bond markets.
The dollar index, which tracks the U.S. currency against six major peers, held at around 91.84 in early London trading on Monday. It hit a late November 2020 high of 92.51 last week.
Rising bond yields will continue to dominate investors' minds this week before a Federal Reserve meeting at which some analysts expect policymakers to strike an optimistic tone on the U.S. economy.
"The Fed is not expected to tinker with its monetary policy but instead communicate via forecasts that the situation is under control and that markets are running way ahead of themselves," SEB analysts said in a note.
U.S. producer prices increased strongly in February, leading to the largest annual gain in nearly 2-1/2 years, with the country's economy set for a massive shot in the arm from President Joe Biden's $1.9 trillion stimulus package.[
The greenback rose 0.2% against the yen to 109.22 yen, drifting to its highest since June 2020.
The euro weakened 0.2% to $1.1925 after rising last week for the first time in three weeks as latest data showed hedge funds slashed their net euro positions.
The Australian dollar -- viewed widely as a liquid proxy for risk appetite -- fell 0.3% to $0.7732, extending Friday's 0.4% loss.
Bitcoin weakened 1.4% after surging to a record high of $61,781.83 over the weekend.
The dollar has been supported by a paring of bets for its decline, with speculators cutting net short positions to the lowest since mid-November in the week ended March 9.