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Dollar heads for weekly loss as traders shrug off taper talk

Dollar heads for weekly loss as traders shrug off taper talk

FILE PHOTO: U.S. one dollar and Chinese Yuan are seen in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

SINGAPORE: The dollar was pinned near milestone lows on Friday, and headed for a weekly loss, as traders' initial concerns at taper talk in Federal Reserve minutes ebbed: with actual tapering seeming distant: while pandemic recovery boosted other currencies.

On Wednesday, minutes from the April Fed meeting noted some committee members think that if the economy keeps improving, it might be appropriate, at upcoming meetings, to "begin discussing a plan for adjusting the pace of asset purchases".

But after bouncing off a four-month low on the euro as the mere mention of tapering policy prompted fears of early rate rises, the dollar has dropped back and, at US$1.2225 per euro, is again testing major support around US$1.2345.

The dollar index is at 89.795, just a fraction above a three-month low of 89.686 struck before the Fed minutes were published. The index, which measures the greenback against six major currencies, is down about 0.6per cent for the week so far.

Against the yen the dollar was steady in Asia on Friday at 108.84, having dropped about 0.5per cent on the week. Cryptocurrencies have also staged a comeback, with bitcoin at US$41,171 sitting some 37per cent above Wednesday's low.

"It has been just over 24 hours since markets got spooked by the prospect of the U.S. Fed tapering its asset purchases, but having proverbially slept on it, the mood seems less sour today," ANZ analysts said in a note. "Which seems reasonable – it's not like the Fed is on the brink of wanting to actually act."

A future discussion on tapering is also already reflected in the pricing of U.S. Treasuries and in money markets after the heavy selling of government bonds through February and March, limiting further dollar gains from the Fed minutes.

Benchmark 10-year Treasury yields fell to 1.6340per cent overnight and have range-traded between roughly 1.5per cent and 1.7per cent for two months, after jumping by more than 80 basis points in the first quarter of 2021. Fed Funds futures price the first full rate hike by January 2023.

"The world was, is and will remain awash with cheap dollars," said Societe Generale strategist Kit Juckes.

"As long as the Fed is talking about talking about tapering, Treasuries are likely to remain stuck in their range and the dollar's path of least resistance is to go on falling, albeit slowly."

Elsewhere among major currencies, moves were slight as traders awaited retail sales data in Australia and Purchasing Managers' Index figures across Europe.

The Australian and New Zealand dollars, which are near multi-year highs as lofty commodity prices and strong pandemic recoveries provide support, looked to close the week broadly steady.

The kiwi last bought US$0.7198 and the Aussie US$0.7773.

Sterling is perched close to its highest since 2018 as high vaccination rates support a stronger-than-expected economic recovery. Analysts said retail sales figures, as well as May PMIs later on Friday might deliver a further boost.

Sterling last traded steady at US$1.4185.

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Currency bid prices at 0039 GMT

Descriptio RIC Last U.S. Close Pct YTD Pct High Bid Low Bid

n Previous Change Change

Session

Euro/Dolla

r US$1.2229 +1.2238 +1.2224

US$1.2234 +0.04per cent +0.14per cent

Dollar/Yen

108.8000 +108.8750 +108.8200

108.8450 +0.05per cent +5.39per cent

Euro/Yen

133.03 +133.2000 +132.9800

133.15 +0.09per cent +4.91per cent

Dollar/Swi

ss 0.8974 +0.8976 +0.8969

0.8969 -0.05per cent +1.38per cent

Sterling/D

ollar 1.4190 +1.4194 +1.4185

1.4186 -0.02per cent +3.84per cent

Dollar/Can

adian 1.2059 +1.2068 +1.2057

1.2059 +0.00per cent -5.30per cent

Aussie/Dol

lar 0.7773 +0.7778 +0.7769

0.7772 -0.01per cent +1.03per cent

NZ

Dollar/Dol 0.7205 +0.7203 +0.7196

lar 0.7198 -0.08per cent +0.24per cent

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook.)

Source: Reuters

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