© Reuters. FILE PHOTO: This February 8, 2021 illustration shows US dollar bills in front of the stock chart that is displayed. REUTERS / Dado Ruvic / Illustration
By Tom Westbrook
SINGAPORE (Reuters) – The US dollar hovered just below recent highs on Tuesday as investors searched for clues about the political outlook at this week's Federal Reserve meeting as cryptocurrencies attempted to break out of a month-long range. fell sharply.
The dollar was down about 0.3% against the euro overnight.
But the greenback has been up broadly for more than a month as markets are suspicious that the Fed is starting to taper its monetary support, and data shows that investors are now holding long dollars for the first time since March 2020.
The dollar was quoted at USD 1.1809 per euro and bought 110.27 yen at the start of the Asia session. The Australian and New Zealand dollars held on to modest overnight gains.
The Fed meeting will take place on Wednesday and the focus will be on debates on bond purchases and insights into the convenience of the bank in the face of rising inflation, with the outcome inconclusive for the currency markets.
Commonwealth Bank of Australia (OTC 🙂 strategist Joe Capurso said any indication that the throttling could begin soon would lift the dollar.
However, Steve Englander, head of G10 FX research at Standard Chartered (OTC :), said it was just as important to steer the Fed's deliberations about a sharp but likely temporary spike in inflation.
"We anticipate that Fed chairman (Jerome) Powell will be more patient than many of the recent Fed spokespersons to bring inflation down while domestic conditions still point to a weak labor market," Englander said in a press release to customers.
“A dovish stance from Powell is likely to drive longer-term interest rates higher … due to a rally in inflation breakevens and a reduction in market fears of slower medium-term growth.
"Paradoxically, this is likely to be dollar-negative as it would reduce global uncertainty about the monetary policy response to higher inflation," said Englander.
A tad higher inflation expectations on Monday pushed 10-year real yields in the US to a record low of -1.123%, which also contributed to the dollar's overnight weakness.
The price fell 0.3% overnight and was last stable at 92.584.
Elsewhere, concerns over the spread of the variant delta coronavirus and nervousness in the Chinese stock market during the Asia hours led to cautious trading. The risk sensitive Australian dollar remained stable at $ 0.7382 and that at $ 0.7000. (AUD /)
The pound sterling was above its 20-day moving average and close to a one-week high at $ 1.3827 as early data appeared to show a weakening of soaring COVID-19 cases in the UK, though many over the past week social restrictions have been removed. (UK POUND /)
It held up in stocks despite the turmoil and was stable at 6.4790 on Tuesday as investors waited for the industrial earnings numbers due at 0130 GMT.
fell sharply from a Monday high of $ 40,581 to $ 37,470 after Amazon.com (NASDAQ 🙂 offered a qualified rejection of a weekend news report that it was preparing to accept cryptocurrencies.
"Speculations that have arisen about our specific plans for cryptocurrencies are not true," said a company spokesman.
"We continue to focus on researching what this might look like for customers who shop on Amazon."
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