(Reuters) - The U.S. dollar clung to recent gains on Monday as confusion over aid for Ireland and concerns about a prospective tightening in China kept the euro and higher-yielding currencies on the defensive.
The dollar has also benefited from a sharp rise in U.S. Treasury yields as a run of better economic data led investors to toy with the idea of a sustainable recovery. The U.S. two-year swap rate jumped almost 18 basis points last week to 0.70 percent, the highest in two-months.
"The dollar's relatively impressive performance comes before the Fed has even put one dollar's worth of QE2 to practical work, so some cautionregarding the sustainability of this USD rebound remains warranted," wrote analysts at TD Securities in a note to clients.
"But we wonder whether the past week's price action indicated that USD sentiment was on the cusp of a significant trend change from a technical perspective," they added.
The euro's losses last week tended to suggest that the underlying medium-term trend higher had lost significant momentum and TD saw significant resistance now in the $1.4050/1.4150 range into year-end.
On Monday, the single currency was hovering at $1.3685, having edged up from an early $1.3655 on bids from a U.S. bank. It had traded as low as $1.3573 on Friday before talk of an EU aid package for Ireland lifted it as far as $1.3777.
However, while EU officials have said a deal for Ireland was being discussed, the Irish government itself said it had not made an application for assistance.
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