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U.S. dollar mixed as investors hold back ahead of Fed meeting

04/27/2021 | 03:46pm EDT
FILE PHOTO: Illustration photo of a U.S. five dollar note

NEW YORK (Reuters) - The dollar was mixed against major peers on Tuesday, gaining against the yen and commodity currencies, with investors biding time ahead of a policy decision by the Federal Reserve on Wednesday.

The yen, meanwhile, struggled after the Bank of Japan kept monetary policy on hold and projected that inflation will fail to reach its key 2% target through early 2023.

Trading in currencies was largely subdued ahead of the Fed's two-day meeting, which ends on Wednesday, when no change to policy is expected.

Graphic: Federal Open Market Committee projections -

The market will pay close attention to comments from Fed Chairman Jerome Powell, who is likely to address concerns and questions about whether improving economic conditions warrant a withdrawal of monetary easing. Analysts, however, expect Powell to stick to the Fed's ultra-accommodative stance, which should weigh on Treasury yields and the dollar.

"The Fed is widely expected to maintain current policy settings on Wednesday, but traders are well aware that a hawkish shift - an acknowledgement of underlying economic strength - could trigger renewed dollar upside," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

"If signs of optimism leak through in the official statement or during the press conference, investors are likely to bring tapering expectations forward and drive Treasury yields upward. Awareness of this risk is keeping traders parked in the dollar," he added. 

In afternoon trading, the dollar index, which tracks the U.S. currency against six peers, was flat at 90.897, after dipping to the lowest since March 3 overnight at 90.679.

The dollar added 0.6% to 108.72 yen against the Japanese unit, another safe-haven currency, continuing its rise from the seven-week low of 107.48 reached on Friday. Action Economics noted in its blog that the currency pair closed above the 50-day moving day average of 108.367 for the first time since January, a sign of strength for the dollar.

Japan last week declared a third state of emergency for Tokyo, Osaka, and two other prefectures to contain the pandemic, clouding prospects for a fragile recovery and the yen's outlook.

The dollar has fallen nearly 3% since late March as U.S. Treasury yields traded in narrow ranges after retreating from a 14-month high of 1.776%, slashing the currency's rate appeal.

The euro was little changed at $1.2087, not far from the two-month high of $1.2117 reached on Monday.

The commodity-linked Australian dollar, a barometer of risk appetite, eased 0.5% to US$0.7765, after a sharp rally overnight that took it just shy of a five-week peak.

The offshore Chinese yuan slipped 0.1% to 6.48 per U.S. dollar, after rising to a seven-week top of 6.4710 per dollar on Monday.

In cryptocurrencies, bitcoin hit a high of $55,354.59, following a 10% surge on Monday amid reports JPMorgan Chase is planning to offer a managed bitcoin fund.

That snapped a five-day losing streak that had taken the digital token to the cusp of $47,000, with losses accelerating amid worries about U.S. President Joe Biden's plan to raise capital gains taxes. Bitcoin was last up 1.5% at $54,883.

Ethereum, the second-largest cryptocurrency in terms of market cap, hit a record high of $2,683.65.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by William Maclean and Dan Grebler)

By Gertrude Chavez-Dreyfuss

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) 0.10% 0.94092 Delayed Quote.-3.92%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.17% 0.6405 Delayed Quote.1.53%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) 0.62% 85.093 Delayed Quote.6.50%
AUSTRALIAN DOLLAR / NEW ZEALAND DOLLAR (AUD/NZD) -0.29% 1.07237 Delayed Quote.0.47%
AUSTRALIAN DOLLAR / SWISS FRANC (AUD/CHF) 0.14% 0.70068 Delayed Quote.2.78%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.73% 0.77796 Delayed Quote.0.37%
BITCOIN - EURO -3.61% 39725.97 Real-time Quote.74.55%
BITCOIN - UNITED STATES DOLLAR -3.56% 48240.68 Real-time Quote.73.11%
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) -0.40% 1.81114 Delayed Quote.2.42%
BRITISH POUND / CHINESE YUAN RENMINBI (GBP/CNY) 0.00% 9.079337 Delayed Quote.1.58%
BRITISH POUND / EURO (GBP/EUR) -0.24% 1.1602 Delayed Quote.3.94%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.16% 154.078 Delayed Quote.9.01%
BRITISH POUND / US DOLLAR (GBP/USD) 0.34% 1.40928 Delayed Quote.2.72%
CANADIAN DOLLAR / CHINESE YUAN RENMINBI (CAD/CNY) 0.00% 5.3175 Delayed Quote.3.40%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.00% 0.680429 Delayed Quote.5.72%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.39% 90.321 Delayed Quote.10.92%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.01% 0.8256 Delayed Quote.4.64%
EURO / AUSTRALIAN DOLLAR (EUR/AUD) -0.21% 1.56032 Delayed Quote.-1.46%
EURO / CHINESE YUAN RENMINBI (EUR/CNY) 0.34% 7.8174 Delayed Quote.-2.26%
EURO / US DOLLAR (EUR/USD) 0.57% 1.21451 Delayed Quote.-1.12%
INDIAN RUPEE / AUSTRALIAN DOLLAR (INR/AUD) 0.00% 0.017553 Delayed Quote.-0.98%
INDIAN RUPEE / CHINESE YUAN RENMINBI (INR/CNY) 0.00% 0.087896 Delayed Quote.-1.69%
INDIAN RUPEE / EURO (INR/EUR) 0.00% 0.011239 Delayed Quote.0.58%
INDIAN RUPEE / JAPANESE YEN (INR/JPY) 0.00% 1.49334 Delayed Quote.5.50%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.00% 0.013655 Delayed Quote.-0.55%
NEW ZEALAND DOLLAR / JAPANESE YEN (NZD/JPY) 0.85% 79.313 Delayed Quote.6.10%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.95% 0.72495 Delayed Quote.0.03%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.00% 6.4429 Delayed Quote.-0.80%
US DOLLAR / AUSTRALIAN DOLLAR (USD/AUD) 0.00% 1.285413 Delayed Quote.-0.40%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.00% 6.4367 Delayed Quote.-1.08%
US DOLLAR / JAPANESE YEN (USD/JPY) -0.15% 109.347 Delayed Quote.6.12%
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