CORRECTED-FOREX-Dollar in doldrums as traders ponder Fed policy path; sterling soars

  • 6/1/2021
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(Corrects paragraph 4 sterling high to $1.4250 from $1.4259) * Graphic: World FX rates tmsnrt.rs/2RBWI5E By Kevin Buckland and Tom Westbrook TOKYO/SINGAPORE, June 1 (Reuters) - Sterling hit a three-year high and the dollar traded under pressure on Tuesday, as investors waited for the next batch of U.S. and European data to shape the outlook on interest rates. Central bankers on both sides of the Atlantic have repeatedly said recent price pressures are likely to be transitory, and not prompt pre-emptive policy tightening, but investors are wary of a strong recovery forcing their hand. A shift in tone in Britain has helped sterling scale February"s peak on Tuesday in the wake of remarks last week from Bank of England policymaker Gertjan Vlieghe pointing to rates rising late next year or sooner if the economy strengthens. The pound was the best-performing G10 currency last month and it rose as high as $1.4250 in the Asia session, its strongest since April 2018. The Australian dollar was the other major mover, and it added as much as 0.5% as Australia"s current account surplus hit a record high and drove upward revisions to economists" growth forecasts. Some of those gains were pared and the Aussie traded at $0.7745 after the Reserve Bank of Australia made no changes to policy settings and stuck with a dovish tone. The yen edged marginally higher for a second consecutive session, while other majors were mostly steady. China"s yuan took a breather after posting its best month since last November, and was flat at 6.3705 per dollar. Traders in London and New York return from market holidays on Tuesday. "The dollar bias remains negative on the immediate horizon," analysts at Singapore"s OCBC Bank said in a note on Tuesday. "The inability to impute Fed tapering or rate hike expectations continue to weigh." Some clues may come from European inflation data and a U.S. manufacturing survey due later on Tuesday and from U.S. labour data due on Friday. Federal Reserve Vice Chair Randal Quarles and Governor Lael Brainard will also both be speaking at separate events on Tuesday. Commonwealth Bank of Australia strategist Joseph Capurso says that trimmed measures of inflation, which eliminate the most extreme price changes, show the U.S. has no inflation problem, and markets will need to unwind some of the expectation for near-term policy tightening, which will weigh on the dollar. The global pandemic recovery will provide an additional headwind, he said. "The world economy is clearly recovering, and that is going to be bad for the U.S. dollar because it’s a counter-cyclical currency," Capurso said. "The U.S. dollar has been pretty heavy in the last few weeks, and I think it keeps trending lower." That includes a drop to $1.24 per euro by the end of this month, extending to $1.32 by the middle of next year. The euro was steady at $1.2224 on Tuesday, not far from a nearly five-month high of $1.2266 touched last week. The U.S. dollar index held at 89.817. Crypto currencies were broadly steady, with bitcoin last just below $37,000. ======================================================== Currency bid prices at 459 GMT Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.2223 $1.2225 -0.01% +0.05% +1.2236 +1.2222 Dollar/Yen 109.5050 109.4600 +0.02% +5.99% +109.5600 +109.3900 Euro/Yen Dollar/Swiss 0.8989 0.8987 +0.02% +1.61% +0.8991 +0.8981 Sterling/Dollar 1.4233 1.4215 +0.13% +4.19% +1.4249 +1.4209 Dollar/Canadian 1.2050 1.2071 -0.16% -5.36% +1.2066 +1.2047 Aussie/Dollar 0.7745 0.7728 +0.23% +0.70% +0.7768 +0.7736 NZ 0.7277 0.7275 +0.03% +1.34% +0.7288 +0.7270 Dollar/Dollar All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ (Reporting by Kevin Buckland in Tokyo and Tom Westbrook in Singapore) Our Standards: The Thomson Reuters Trust Principles.

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