Traders wait for the Fed, the dollar is hovering near highs Reuters

Author: Tom Westbrook

SINGAPORE (Reuters)-The U.S. dollar hovered slightly below recent highs on Tuesday, investors turned to this week’s Fed meeting to seek clues about the policy outlook, and cryptocurrencies fell sharply after trying to break through the months-long range.

The U.S. dollar fell about 0.3% against the euro overnight.

However, as the market is cautious about the Fed’s starting to reduce currency support, and data shows that investors have been longing the US dollar for the first time since March 2020, the US dollar has generally risen in more than a month.

The dollar was quoted at 1.1809 against the euro, buying 110.27 yen in early Asian trading. The Australian and New Zealand dollars rose slightly overnight.

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% overnight and finally held steady at 92.584.

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 US$0.7382 and US$0.7000. [AUD/]

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. [GBP/]

Despite the turmoil in the stock market, it remained stable at 6.4790 on Tuesday, while investors awaited the industrial profit data released at 0130 GMT.

After Amazon (NASDAQ:) expressed its readiness to accept cryptocurrency in news reports over the weekend, the company dropped sharply from its peak of US$40,581 on Monday to US$37,470.

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.”