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Dollar steady as Fed meeting looms; bitcoin pops above $40,000

06/14/2021 | 03:46pm EDT

* U.S. dollar index flat on the day

* Bitcoin tops $40,000 before pairing gains (Updates to U.S. afternoon)

NEW YORK, June 14 (Reuters) - The dollar was little changed against a basket of major currencies on Monday as traders awaited a much-anticipated U.S. Federal Reserve meeting later this week that might signal a change in the outlook for U.S. monetary policy.

Currency markets settled in tight ranges with implied volatility plumbing to multi-year lows after last week's strong inflation readings and a dovish European Central Bank meeting failed to dislodge currencies from recent trading levels.

"It's all about the FOMC this week, and we'll be watching to see exactly how much taper talk has really been going on and if it has any impact on the medium term outlook," Brad Bechtel, global head of FX at Jefferies, said in a note.

The dollar index, which measures the greenback against a basket of six currencies, was about flat on the day at 90.512. Last week the index rose 0.4%, its largest weekly change in five weeks.

Muted FX moves in recent weeks crushed the Deutsche Bank FX Volatility Index down to 5.6 on Friday, its lowest in nearly 16 months.

Against the yen the dollar rose 0.38% to a more than one-week high of 110.09 yen.

"A modest uptick in Treasury yields has been supportive of the rate-sensitive pairing," said Ronald Simpson, managing director, global currency analysis at Action Economics.

The dollar's strength against the Japanese currency may be a sign the FX market is looking for a less dovish outcome from the Fed meeting, Simpson said.

The Fed begins a scheduled two-day policy meeting on Tuesday. Nearly 60% of economists in a Reuters poll said a much-anticipated taper announcement will come in the next quarter, despite a patchy recovery in the job market.

Recent data pointing to a surge in inflation has raised concerns that price pressure following the post-COVID-19 economic reopening could force policymakers into an earlier tapering of currency-depreciating stimulus.

Sterling was largely unmoved by Monday's news that Britain is set to delay the end of social distancing measures as the government seeks to contain a rapid rise in COVID-19 infections.

In cryptocurrencies, bitcoin traded above $40,000 for the first time in more than two weeks, before pairing gains to trade at $39,649.03.

(Reporting by Saqib Iqbal Ahmed in New York and Saikat Chatterjee in London; Editing by Catherine Evans, Bernadette Baum and Jonathan Oatis)

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) -0.14% 80.782 Delayed Quote.2.59%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.25% 0.73477 Delayed Quote.-4.03%
BITCOIN - EURO 1.97% 33652.44 Real-time Quote.39.89%
BITCOIN - UNITED STATES DOLLAR 1.94% 39760.34 Real-time Quote.35.09%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.12% 152.633 Delayed Quote.8.08%
BRITISH POUND / US DOLLAR (GBP/USD) 0.00% 1.38835 Delayed Quote.1.11%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.31% 87.47 Delayed Quote.8.42%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.15% 0.7952 Delayed Quote.1.54%
DEUTSCHE BANK AG -0.15% 10.606 Delayed Quote.18.67%
DOW JONES FXCM DOLLAR INDEX -0.02% 11919.35 Delayed Quote.2.21%
EURO / JAPANESE YEN (EUR/JPY) 0.13% 129.97 Delayed Quote.3.36%
EURO / US DOLLAR (EUR/USD) 0.02% 1.18223 Delayed Quote.-3.35%
INDIAN RUPEE / JAPANESE YEN (INR/JPY) 0.39% 1.478984 Delayed Quote.5.11%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.16% 0.013445 Delayed Quote.-1.74%
JAPANESE YEN / SWISS FRANC (JPY/CHF) -0.16% 0.8303 Delayed Quote.-3.18%
NEW ZEALAND DOLLAR / JAPANESE YEN (NZD/JPY) -0.22% 76.289 Delayed Quote.4.18%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.36% 0.69391 Delayed Quote.-2.49%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.12% 109.93 Delayed Quote.6.89%
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