The dollar backed away from 312 month highs on Tuesday as U.S. Treasury yields stabilised, allowing room for riskier currencies such as the pound, Australian dollar and Kiwi dollar to make gains.

The index that measures the dollars strength against a basket of other currencies was 0.2 lower in early deals in London, at 92.181, after hitting a 312 month high of 92.506 during Asian trading hours.

U.S. 10year Treasury yields fell as low as 1.5350, down for a second day.

Traders are wary yields could rise further this week as the market will have to digest a 120 billion auction of 3, 10, and 30year Treasuries, especially after last weeks soft auction and a 7year note sale that saw a spike in yields.

Stability is likely to remain the theme of the day ahead of the UST auctions and the US inflation release tomorrow, which are the nearterm risks for FX markets given the possible negative spillover into USTs and the risk of a further sell off, said ING strategists Chris Turner, Francesco Pesole and Petr Krpata in a daily note.

Nearterm, the currencies of oil exporters should be favoured over low yielders in the G10 FX space, with the rising oil price providing an offsetting factor to the challenging global risk environment.

The Norwegian crown, an oillinked currency, gained 0.6 to 8.4898 per dollar. Oil prices have climbed in recent days on expectations of a recovery in the global economy and on a likely drawdown in crude oil inventories in the United States, the worlds…