* Graphic: World FX rates tmsnrt.rs/2RBWI5E
* Fed minutes loom on horizon
* UK inflation doubles
* China"s policy moves unsettle cryptocurrencies
By Julien Ponthus
LONDON, May 19 (Reuters) - The dollar hovered around its
lowest levels of the year against other major currencies on
Wednesday as inflation-wary traders awaited U.S. Federal Reserve
minutes, and China"s tough stance on cryptocurrencies sent
bitcoin and ether tumbling.
With data last week showing the fastest increase in U.S.
consumer prices in more than a decade, fears are growing that
interest rates will be raised sooner than expected despite
Federal Reserve policymakers stressing the spike is temporary.
The minutes from the Fed"s most recent meeting, due later on
Wednesday, are expected to confirm policymakers think a rate
hike is still in the distance, but any discordant note or hint
on when their position could evolve could have a significant
market impact.
"The question is: when will the Fed change its mindset about
inflation?", said Kit Juckes, a strategist at Societe Generale,
adding that for the time being, he expected a status quo on the
monetary policy front.
In early European trading, the dollar index fell to a
low of 89.686, a level unseen since Feb. 25, but gradually rose
back against its basket of six major currencies.
It was up 0.23% at 90.019 at 1109 GMT.
Exposing the pressure mounting on prices across the global
economy, UK inflation more than doubled in April to 1.5% from a
month earlier, raising fears the rising trend was here to stay.
"We do not believe that higher inflation will be fully
transitory as many in markets contend and as global central
bankers seem to presume", commented Kallum Pickering, an
economist at Berenberg, adding he believes inflation is at a
turning point.
The British pound eased 0.3% against the dollar to
$1.4165 but had reached one of its highest levels of the year
earlier in the session at $1.4200.
In South Africa, consumer price growth rose to its highest
in more than a year, weakening the rand.
Canada was also due to publish consumer price data later on
Wednesday, but in the meantime the greenback ticked up against
the Canadian dollar to C$1.2086, still close to its
weakest since May 2015.
The euro, which hit its highest against the dollar
since the beginning of January at $1.2223 earlier, retreated
back to $1.2197.
In the Southern Hemisphere, the selling pressure on
commodities weighed on the Australian and New Zealand
dollars, which both retreated sharply about 0.7%
against the dollar.
Cryptocurrencies tumbled after China banned its financial
institutions and payment companies from providing services
related to cryptocurrency transactions, and warned investors
against speculative crypto trading.
Bitcoin briefly dropped to a three-month low of
$36,250 and breached key technical levels while abandoning the
closely watched $40,000 mark. It was still losing 11.2% at
$38,103 at 1137 GMT.
Rival digital currency ether was down about 20%
at $2,690.
Chinese financial institutions will not be able to offer
cryptocurrency registration, trading, clearing, and settlement,
in a blow to investors who were betting that digital assets will
gain mainstream status.
"China has for some time been putting pressure on the crypto
space, but this marks an intensification – other countries might
follow now as central banks make strides towards their own
digital currencies", wrote Neil Wilson, chief market analyst at
Markets.com.
"Until now Western regulators have been pretty relaxed about
bitcoin, but this might change soon", he added.
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Currency bid prices at 1138 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.2202 $1.2224 -0.18% -0.13% +1.2245 +1.2189
Dollar/Yen 109.2400 108.9050 +0.35% +5.80% +109.3300 +108.8900
Euro/Yen
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