* U.S. dollar near 2021 highs vs euro, yen* Currency markets quiet in busy cenbank week* Euro unruffled by Lagarde comments* Aussie rebounds
* U.S. dollar near 2021 highs vs euro, yen
* Currency markets quiet in busy cenbank week
* Euro unruffled by Lagarde comments
* Aussie rebounds partially after RBA-triggered drop
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
(Adds details, latest prices)
By Tommy Wilkes
LONDON, Nov 3 (Reuters) – The dollar hovered near recent
peaks versus the euro and the yen on Wednesday as investors
waited for the U.S. Federal Reserve to start unwinding its
pandemic-era stimulus and to assess Chair Jerome Powell’s take
on inflationary pressures.
Moves were small in Asia and at the start of the European
trading day in the middle of a busy week for central banks, with
the Bank of England meeting on Thursday.
European Central Bank Christina Lagarde said an interest
rate rise in 2022 was very unlikely because inflation was too
low, sending government bond yields lower. But the euro barely
budged.
Against the euro the greenback was down marginally at
$1.1592, not far from the $1.1522 low reached in
October and the strongest level for the dollar since July 2020.
The dollar index dipped 0.1% to 93.996 but remained
close to its 2021 peak of 94.563 hit last month.
Dollar/yen traded at 113.8, near a four-year high.
The Fed is expected to announce the tapering of its $120
billion-a-month asset purchase programme in its policy statement
at 1800 GMT.
Traders are focused on clues around what that means for rate
rises, after a month of seismic bond market moves in
anticipation of hikes as soon as next year.
Analysts are divided as to what the Fed meeting and
statement will mean for the dollar, especially after the Reserve
Bank of Australia on Tuesday and ECB on Wednesday both pushed
back against market pricing of tighter policy.
“The dollar bearish case today is that the tapering is
widely expected and an inherently dovish Fed, concerned about
upsetting the bond market, does not change its statement
substantially,” ING strategists wrote.
“Yet, at some point, the Fed is going to have to acknowledge
that elevated inflation does not ‘largely reflect transitory
factors’. Many dovish central banks around the world are already
doing this and should the Fed start to show greater concern
about this today, U.S. rates and the dollar could get a boost.”
The RBA on Tuesday abandoned its short-term yield target and
dropped its expectation of holding rates at record lows until
2024, though the Aussie fell because the bank also pushed back
on aggressive pricing for 2022 hikes.
The Aussie dropped 1.2% against the dollar on
Tuesday and sat at $0.744 on Wednesday, up 0.2% from the session
open. The New Zealand dollar was also dragged 1% lower,
but found support on Wednesday from strong labour data and
hovered at $0.714, up 0.4%.
Money markets have dialled back expectations for a 15 basis
point hike from the Bank of England on Thursday but still expect
one before 2022.
Sterling recovered from a two-week low to trade
0.2% higher $1.3645.
The euro fell again versus the Swiss franc and was last down
0.3% at 1.055 francs, close to this week’s almost
18-month low of 1.0548.
(Editing by Barbara Lewis and Nick Macfie)
www.lse.co.uk