* Dollar holds gains as Fed's Clarida sounds hawkish
* Euro falls back after failing to clear resistance
* NZ dollar bid as market wagers on Aug rate hike
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Ritvik Carvalho and Wayne Cole
LONDON, Aug 5 (Reuters) - The dollar held gains against a
basket of currencies on Thursday after hawkish comments from the
U.S. Federal Reserve led markets to move forward the likely
timing of a policy tightening.
Sterling ticked slightly higher after the Bank of England
kept the size of its bond-buying programme unchanged and held
its benchmark interest rate at a historic low of 0.1%.
The Bank said notably that it would start reducing its stock
of bonds when its policy rate reaches 0.5% by not reinvesting
proceeds and that it would consider actively selling down
holdings when the rate reaches at least 1%.
“While markets took the news of the 7-1 split as dovish
initially, the undertones of today’s policy statement and
monetary policy report (MPR) are much more hawkish than
initially expected," said Simon Harvey, senior FX analyst at
Monex Europe.
The euro ticked higher 0.15% to $1.1854, having
recoiled from a top of $1.1899 overnight. The dollar also
reached 109.75 yen, although the yen began to recover
some lost ground.
On Wednesday, Fed Vice Chair Richard Clarida said conditions
for an interest rate hike could be met in late 2022, setting the
stage for a move in early 2023.
He and three other Fed members also signalled a move to
taper bond buying later this year or early next depending on
the labour market over the next few months.
"Clarida’s comments are allowing the dollar to stay well
supported into the payrolls numbers on Friday," said ING FX
strategists Francesco Pesole and Chris Turner.
"For today, the dollar could merely find some stabilisation
amid a fairly quiet U.S. calendar (focus will only be on jobless
claims)."
MIXED DATA
Predicting the jobs report with any confidence remains
tricky as the spread of the Delta variant and labour bottlenecks
roil the market.
Thus, the median forecast for payrolls is 870,000 while the
range of estimates stretches from 350,000 to 1.6 million.
Mixed data on Wednesday added to the uncertainty as a
surprisingly weak ADP report on private hiring clashed with the
strongest reading yet for U.S. services.
Clarida's comments led investors to price in slightly higher
chances of a hike in late 2022/early 2023 and to a flattening of
the Treasury yield curve as short-term yields rose.
Such a move would likely precede any tightening by the
European Central Bank, which is battling to get inflation near
its target.
The Reserve Bank of New Zealand (RBNZ) seems likely to hike
rates at its next policy meeting on Aug. 18, making it the first
in the developed world to move since the pandemic hit.
A super-strong jobs report on Wednesday added to the case
for New Zealand tightening and sent the kiwi to a one-month peak
of $0.7088 overnight, before steadying at $0.7041.
"NZ's economy has almost closed its output gap and will risk
overheating if stimulus is not reduced," said Westpac's head of
NZ strategy Imre Speizer. "Markets are fully pricing a 25 bps
rate hike, and are flirting with some chance of 50 bps."
He recommended buying the kiwi on any pullback to $0.7005,
for a target of $0.7300.
(Reporting by Ritvik Carvalho; additional reporting by Wayne
Cole in Sydney; editing by Barbara Lewis)