Market News

FOREX-Dollar creeps higher as Fed's taper looms - REUTERS

SEPTEMBER 20, 2021

    * Dollar drifts higher in thin Asian trade

    * Week packed with central bank meetings, focus on Fed

    By Tom Westbrook
    SINGAPORE, Sept 20 (Reuters) - The dollar began the week
firmly on Monday with investors in a cautious mood ahead of
several central bank meetings, headlined by the Federal Reserve,
while looming catastrophe at indebted developer China Evergrande
added to markets' fragility.
    In thin trade, owing to holidays in Japan and China, the
euro nursed losses from its weakest week in a month,
slipping slightly to touch a four-week low of $1.1721.
    Sterling and the Australian and New Zealand dollars were
also pressured toward new troughs. The kiwi, at
$0.7024, and sterling, at $1.3722, made three week lows
as did the Aussie which fell 0.1% to $0.7253.
    "The U.S. dollar is having a bit of a rebound," said Westpac
analyst Imre Speizer, drawing support, he added, both from an
expectation of imminent asset purchase reductions from the Fed
and from caution as equity markets begin to get the wobbles.
    "Everyone is eying the Fed, waiting for a tapering signal."
    The U.S. dollar index rose very slightly to a
month-high 93.263. The yen held at 110.01 per dollar.
    The week brings central banks in Japan, the UK, Switzerland,
Sweden, Norway, Indonesia, the Philippines, Taiwan, Brazil,
South Africa, Turkey and Hungary as well as elections in Canada
and Germany -- though traders are mostly focused on the Fed.
    The Fed concludes a two-day meeting on Wednesday and
markets' consensus is that it will stick with broad plans to
begin tapering this year but will hold off providing details or
a timeline for a at least a month.
    Creeping U.S. yields, however, which at the 10-year tenor
rose for a fourth straight week last week point to
risks of a hawkish surprise or a shift in projections to show
hikes as soon a 2022, both of which could support the dollar.
    It would only take two Fed members to change their minds for
the "dot plot" of median projections to reflect hikes next year,
said Marshall Gittler of brokerage BDSwiss.
    "So it's quite possible that they go from forecasting no
rate rises next year to at least one," he said.
    "Similarly, they are now forecasting two hikes in 2023 –
that could easily go to three as well."
    Among the other major central banks the Bank of England is
expected to leave policy settings unchanged, but traders see
potential for gains in the currency if the bank adopts a hawkish
tone or more members being calling for asset purchase tapering.
    There is no expectation of policy shifts at the resolutely
dovish Bank of Japan on Wednesday, but a day later Norway's
Norges Bank is expected to becomes the first G10 central bank to
lift rates.
    The Norwegian crown had slipped with oil prices and
the rising dollar on Friday and last sat at a
one-and-a-half-week low of 8.7154 per dollar.
    The oil-sensitive Canadian dollar was also on the
back foot ahead of an election on Monday where polling points to
an advantage for incumbent Prime Minister Justin Trudeau but a
likelihood he remains leader of a minority government.

    In China, onshore stock and currency markets were closed on
Monday but the yuan was under pressure offshore as the debt
crisis engulfing Evergrande added to discomfort over
China's slowing economy and regulatory crackdowns.
    The yuan fell about 0.1% and through its 200-day
moving average to 6.4770 per dollar. Evergrande has a bond
interest payment of $83.5 million due on Thursday.


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