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

ForexJun 14, 2021 03:57PM ET
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© Reuters. FILE PHOTO: An employee of the Korea Exchange Bank counts one hundred U.S. dollar notes during a photo opportunity at the bank's headquarters in Seoul April 28, 2010. REUTERS/Jo Yong-Hak/File Photo

By Saqib Iqbal Ahmed and Saikat Chatterjee

NEW YORK (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 (NYSE:JEF), 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 (DE:DBKGn) FX Volatility Index down to 5.6 on Friday, its lowest in nearly 16 months.

Graphic: Deutsche Bank Currency Volatility Index - https://fingfx.thomsonreuters.com/gfx/mkt/ygdvzxerxvw/Pasted%20image%201623676438030.png

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.

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

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Comments (4)
Matthew Lenco
Matthew Lenco Jun 14, 2021 7:16AM ET
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I just shorted usd actoss three currencies and closed with profit this morning.
perplexed76 .
perplexed76 . Jun 14, 2021 3:20AM ET
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jerome and jannete said it million times: low rates till they are alive
Luqman Firdaus
Luqman Firdaus Jun 14, 2021 3:09AM ET
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$ 675.000
Miles Mathewson
Miles Mathewson Jun 13, 2021 9:19PM ET
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It's about time for the USD to recover some ground after old Joe many attempts to kill it
Joel Schwartz
Joel Schwartz Jun 13, 2021 9:19PM ET
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You mean Powell? Pull up an M2 Money Supply Chart and tell me when it went parabolic.
Miles Mathewson
Miles Mathewson Jun 13, 2021 9:19PM ET
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Joel Schwartz  Old Joe is the one talking trillions like it's nothing....FED is also to blame..all the gov
 
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