© Reuters. File photo: In this illustration taken on February 8, 2021, a dollar bill can be seen in front of the displayed stock chart. REUTERS/Dado Ruvic/Illustration
Author: Tom Westbrook
SINGAPORE (Reuters)-The U.S. dollar hovered below recent highs on Tuesday as investors turned to this week’s Fed meeting for clues about the policy outlook, while cryptocurrencies fell sharply from attempts to break through the months-long range.
The US dollar held steady at US$1.1809 per euro in Asia and found support after a small decline on Monday.
It bought 110.18 yen, and the Australian and New Zealand dollars kept rising slightly on Monday.
For more than a month, the U.S. dollar has been generally rising due to the market’s cautious attitude towards the Fed’s starting to reduce currency support. Position data shows that last week investors bought US dollars for the first time since March 2020.
The Fed will hold a meeting on Wednesday, focusing on discussions surrounding the purchase of bonds and insights into banks’ confidence in soaring inflation. The outcome of the money market is unclear.
Commonwealth Bank of Australia (OTC:) strategist Joe Capurso said the suggestion that the reduction may begin soon will boost the dollar.
However, Steve Englander, head of G10 foreign exchange research at Standard Chartered Bank (OTC:), said that the idea of guiding the Fed to a sharp but possibly short jump in inflation is equally important.
In a report to clients, England said: “We expect that as long as domestic economic conditions still indicate a weak labor market, Fed Chairman (Jerome) Powell will express more patience to reduce inflation than many Fed spokespersons recently. .”
“Powell’s dovish tendencies may push up long-term interest rates…because of the rebound in inflation break-even and the market’s concerns about the medium-term growth slowdown.
“The paradox is that this may be detrimental to the U.S. dollar, because uncertainty about the global policy response to rising inflation will be reduced,” England said.
The slightly higher inflation expectations on Monday pushed the US 10-year real yield to a historical low of -1.123%, which also caused the US dollar to weaken overnight.
It fell 0.3% on Monday and finally held steady at 92.600.
Elsewhere, concerns about the spread of the Delta coronavirus variant and the nervousness of the Chinese stock market have kept trading in the Asian session cautious. The risk-sensitive Australian dollar held steady at 0.7382 USD and near 0.7000 USD.
The pound is above its 20-day moving average and is close to a one-week high of $1.3827, because despite the removal of many social restrictions last week, early data seems to show that the surge in COVID-19 cases in the UK has weakened.
After Amazon (NASDAQ:) expressed its readiness to accept cryptocurrencies in weekend news reports, Amazon (NASDAQ:) provided qualified denials, which dropped sharply from Monday’s high of $40,000 to $37,000.
A company spokesperson said: “The speculation surrounding our specific cryptocurrency plan is incorrect.”
“We are still focused on exploring what this will look like for customers shopping on Amazon.”
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