SINGAPORE (Reuters) - The dollar began a week full of big economic data on a firm footing, with investors wary of the Federal Reserve beginning its exit from super-supportive policy even as cases of the coronavirus surge.The greenback closed out its best week in three weeks on Friday, gaining about 0.6% on the euro as it benefited both from safety flows and the policy outlook lifting yields on U.S. Treasuries. It maintained gains early in the Asia session to hold the common currency at $1.1810. It was also steady at 109.91 Japanese yen, while its strength has for now stymied rallies in the Australian and New Zealand dollars. In morning trade, the Aussie was marginally firmer at $0.7362, but it has struggled to stay above $0.74. The kiwi was marginally weaker at $0.7115 but has likewise battled to break out of a months-long range despite the Reserve Bank of New Zealand preparing for interest rate hikes. “A couple of dynamics favour the dollar,” said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney, particularly risk aversion as even vaccinated countries such as Singapore and Britain log surges in COVID-19 cases.“Re-opening still faces challenges from the consumer, who is cautious and from bottlenecks which restrict ability for the economy to rebound with some gusto,” he said. “At the same time rising infections suggest we may still need to reintroduce restrictions of some sort. The other thing is that the Fed continues to signal that tapering is coming.” U.S. consumer price data on Tuesday is expected to show core inflation easing slightly to 4.2%. However, with Philadelphia Fed President Patrick Harker, in a Nikkei interview here on Monday, joining a chorus of policymakers keen to begin scaling back asset purchases, bond traders seem to think a slowdown won"t be enough to delay tapering much.Ten-year Treasuries were sold for a third straight week last week - the longest streak since yields lurched higher in February and March - lifting the 10-year yield to 1.3462%. [US/] “My baseline forecast is still to have inflation around 4% this year, ending this year, and then starting to fall back to 2% over the years 2022 and 2023. However, I do see elevated risk that inflation could run higher,” Harker told the Nikkei. “I’d like to start the taper process soon, so that we can finish the tapering process, so if we need to increase the policy rate, we have the room to do that. And I think we need to buy ourselves that option.” Also ahead on the calendar are Chinese economic data, likely to highlight wobbly retail sales on Wednesday and further add to concerns about the world’s second biggest economy. The yuan was steady at 6.4424 per dollar in offshore trade. Elsewhere, sterling held at $1.3834 and cryptocurrencies bitcoin and ether were broadly steady, with bitcoin at about $46,000.
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