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Dollar holds firm in cautious trading before Fed meets

ForexMar 16, 2021 12:35AM ET
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© Reuters. U.S. One dollar banknotes are seen in front of displayed stock graph in this illustration taken

By Kevin Buckland and Sagarika Jaisinghani

TOKYO (Reuters) - The U.S. dollar clung to small gains on Tuesday as caution reigned in currency markets ahead of major central bank meetings, beginning with a two-day Federal Reserve gathering due to start later in the global day.

The greenback hovered just off its highest since June versus the yen and cemented a position around $1.19 per euro in muted trading.

The firmer tone for the dollar came despite a retreat in U.S. benchmark yields from the highest levels in more than a year ahead of the Fed meeting.

Expectations are running low for monetary policymakers to shift from their accommodative stance despite forecasts of rapid economic growth in the wake of an accelerating COVID-19 vaccine roll-out and a $1.9 trillion pandemic relief package.

Investors will pore over whatever the Fed has to say about the run-up in yields, which have risen on bets that economic growth and inflation could prompt a faster-than-expected normalisation of monetary policy.

"It's a very pivotal meeting from that perspective," said Mayank Mishra, an FX strategist at Standard Chartered (OTC:SCBFF) Bank in Singapore.

"The other thing that is being awaited is any decision on the supplemental leverage ratio (SLR) exemption. We don't expect any explicit push back on back-end yields, but an extension of the SLR can offer some relief to the market."

The SLR exemption, a regulatory break that allows big banks to exclude reserve deposits and Treasuries from capital ratios, is due to expire on March 31.

The dollar was little changed at 109.170 yen after rising to a nine-month high of 109.365 on Monday. The Bank of Japan begins a two-day policy meeting on Thursday, along with an extensive policy review.

The euro was largely flat at $1.19330, languishing below $1.20 since March 5. Europe's vaccine roll-out has been hampered by the suspension of AstraZeneca (NASDAQ:AZN) shots in Germany, France and other nations amid concerns about possible serious side effects.

Sterling fell about 0.2% to $1.3871 ahead of a Bank of England meeting on Thursday, where the central bank is expected to keep its benchmark interest rate at its historic low of 0.1% and its bond-buying programme unchanged.

The dollar's index against six major currencies was flat at 91.798 after rising nearly 0.2% on Monday.

The Australian dollar, viewed widely as a liquid proxy for risk appetite, and the New Zealand dollar were little changed against the U.S. dollar. The commodity-linked currencies are on course to post their fourth straight quarterly gain as commodity prices rebound on bets of economic growth.

Bitcoin, meanwhile, slipped to $54,198.64 following its jump to a record $61,781.83 on Saturday.

========================================================

Currency bid prices at 0400 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1934 $1.1929 +0.04% -2.32% +1.1937 +1.1923

Dollar/Yen 109.1550 109.1200 +0.06% +5.71% +109.2400 +109.1900

Euro/Yen 130.26 130.16 +0.08% +2.63% +130.3900 +130.1400

Dollar/Swiss 0.9266 0.9275 -0.10% +4.74% +0.9279 +0.9266

Sterling/Dollar 1.3869 1.3900 -0.21% +1.53% +1.3903 +1.3867

Dollar/Canadian 1.2478 1.2473 +0.05% -2.00% +1.2487 +1.2468

Aussie/Dollar 0.7752 0.7756 -0.05% +0.77% +0.7755 +0.7742

NZ 0.7195 0.7200 +0.00% +0.26% +0.7205 +0.7195

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

Dollar holds firm in cautious trading before Fed meets
 

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Comments (3)
Chris Poulos
Chris Poulos Mar 16, 2021 2:19AM ET
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bitcoin will eventually be worth about 7 trillion dollars ... each. anyone who owns some bitcoin will own more than the cumulative value of everything on earth. thats why elon wants to go to mars. we must keep expanding the financial base so people can continue to own more and more stufff.
Chris Sundo
Chris Sundo Mar 15, 2021 11:44PM ET
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What does the article mean by 'vindicate the current lift in Fed hike expectations"?
Joel Schwartz
Joel Schwartz Mar 15, 2021 11:44PM ET
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How is the FED honestly going to tell Americans that the $IWM gained more this year than the last five put together, but no - there’s no inflation from their reckless monetary policy.
 
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