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FOREX-Dollar hovers above two-week lows

Thu, 8th Apr 2021 11:54

* Fed minutes offer no new catalysts to lift greenback

* Higher U.S. stocks sap demand for dollar as a haven

By Ritvik Carvalho

LONDON, April 8 (Reuters) - The U.S. dollar traded near its
lowest in more than two weeks versus major peers on Thursday,
tracking Treasury yields lower, after minutes of the Federal
Reserve's March policy meeting offered no new catalysts to
dictate market direction.

Fed officials remained cautious about the risks of the
pandemic - even as the U.S. recovery gathered steam amid massive
stimulus - and committed to pouring on monetary policy support
until a rebound was more secure, the minutes showed Wednesday.

Fed Chair Jerome Powell will speak at a virtual
International Monetary Fund conference later on Thursday.

The dollar index which measures the U.S. currency
against a basket of six currencies, edged lower to 92.39 in
London trading, after dipping as low as 92.134 on Wednesday for
the first time since March 23.

The index rallied to an almost-five-month high of 93.439 at
the end of last month as the U.S. pandemic recovery outpaced
that of most other developed nations, particularly in Europe.

"The Fed minutes delivered no negative surprise for risk
sentiment, with the committee reiterating no need to rush into
tightening of monetary conditions and further support the
recovery," said Petr Krpata, chief EMEA FX and interest rates
strategist at ING.

"We expect the very accommodative Fed to eventually weigh on
USD as we move into the summer - rising inflation, yet no signs
of imminent rate hikes will push front-end US real rates further
into the deep negative, and coupled with the recovering global
economy (which should be of a more synchronized nature in 2H21),
should weigh on USD."

The benchmark 10-year Treasury yield was around
1.647% on Thursday, after dipping below 1.63% overnight. It hit
1.776% late last month, its highest in more than a year.

The S&P 500 eked out a modest gain on Wednesday,
moving mainly sideways since surging to a record high to start
the week.

The chief currency strategist at Citigroup Global Markets
Japan, Osamu Takashima, said that the market's direction is
difficult to call, but expects the next move for the dollar to
be lower.

"Current market sentiment is mild risk-on, and under such
circumstances the dollar will weaken gradually - but no big
moves," he said.

The retreat in U.S. yields has also removed a driver for
dollar gains, he added.

The dollar weakened to 109.49 yen, consolidating
after retreating from 110.97, its highest in more than a year,
reached on March 31.

The euro traded 0.1% lower at $1.1863, after
rebounding from $1.1704, its lowest in almost five months,
touched on March 31.

"The vaccination progress in the Eurozone is significantly
lagging that of the U.S., and coronavirus infection rates in the
Eurozone are on the rise again," Commonwealth Bank of Australia
strategist Joseph Capurso wrote in a client note.

"As such, EUR/USD is vulnerable to a move lower towards
1.1700 in the near-term."

(Reporting by Ritvik Carvalho; additional reporting by Kevin
Buckland in Tokyo; editing by Larry King)

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