FOREX-Dollar rises on risk aversion, Fed cautious on economic recovery

(Adds Fed meeting, quote, updates prices)
By Saqib Iqbal Ahmed and Karen Brettell
NEW YORK, Jan 27 (Reuters) - The dollar was boosted by
safety buying on Wednesday as investors turned more cautious on
worries about the economic impact of the COVID-19, and after the
U.S. Federal Reserve expressed concerns about the pace of the
economic recovery.
Stocks and Treasury yields slipped while the safe-haven U.S.
dollar drew buyers.
“There are a lot of concerns about the effectiveness of the
vaccine roll out in the United States," said Minh Trang, senior
FX trader at Silicon Valley Bank. "Today is a solid risk-off day
for sure."
The Federal Reserve left its key overnight interest rate
near zero and made no change to its monthly bond purchases,
pledging again to keep those economic pillars in place until
there is a full rebound from the pandemic-triggered recession.
That has not happened, and the Fed in a policy statement
flagged a potential slowing in the pace of the recovery.

“If anything the dollar is finding support from the Fed’s
more cautious message. I would say that the Fed having noted the
recent moderation in the pace of the recovery is adding to
concerns about the near-term outlook,” said Joe Manimbo, senior
market analyst at Western Union Business Solutions in
Washington.
Global coronavirus cases surpassed 100 million on Wednesday,
according to a Reuters tally, as countries around the world
struggle with new virus variants and vaccine shortfalls.

The U.S. Dollar Currency Index gained 0.53% to
90.636, after earlier reaching 90.896, its highest level since
Jan. 18.
The euro was 0.48% lower on the day at $1.2101.
The single currency was further pressured after the German
government on Wednesday slashed its growth forecast for Europe's
largest economy to 3% this year, a sharp revision from last
autumn's estimate of 4.4%, caused by a second coronavirus
lockdown.
The risk-sensitive Australian dollar sank 1.08% to
$0.7664 after earlier falling to $0.7642, the lowest level since
Jan. 4.
Silicon Valley Bank's Trang cited the historically elevated
level of bearish bets against the greenback as part of the
reason for the U.S. currency's strength as investors rush to
trim those wagers.
Despite the dollar's recent rebound from multi-year lows,
bearish bets on the U.S. currency are at a decade-high.

"Anytime you see that kind of buildup and you see a certain
reversal, you will see a substantial move," Trang said.
Sterling rose to a fresh eight-month high against the euro on
Wednesday as Britain's faster COVID-19 vaccine rollout than the
European Union's offered support to the pound.
Meanwhile bitcoin fell in a volatile session and
slipped below $30,000 for the first time since Jan. 22. It later
recovered to $30,686, down 5.59% on the day. It is down 27% from
a record $42,000 reached on Jan. 8, but up around 174% since its
recent run up began in mid-October.

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Currency bid prices at 3:07PM (2007 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 90.6360 90.1640 +0.53% +0.00% +90.8960 +90.1190
Euro/Dollar $1.2101 $1.2160 -0.48% -0.95% +$1.2170 +$1.2058
Dollar/Yen 104.1600 103.6450 +0.41% +0.76% +104.1800 +103.6000
Euro/Yen 126.04 125.99 +0.04% -0.69% +126.1900 +125.6100
Dollar/Swiss 0.8892 0.8869 +0.29% +0.54% +0.8917 +0.8863
Sterling/Dollar $1.3690 $1.3735 -0.33% +0.20% +$1.3758 +$1.3659
Dollar/Canadian 1.2793 1.2695 +0.81% +0.50% +1.2822 +1.2688
Aussie/Dollar $0.7664 $0.7748 -1.08% -0.37% +$0.7764 +$0.7644
Euro/Swiss 1.0760 1.0780 -0.19% -0.43% +1.0786 +1.0751
Euro/Sterling 0.8837 0.8851 -0.16% -1.12% +0.8859 +0.8813
NZ $0.7163 $0.7239 -1.04% -0.24% +$0.7244 +$0.7147
Dollar/Dollar
Dollar/Norway 8.6455 8.5355 +1.37% +0.76% +8.6975 +8.5540
Euro/Norway 10.4646 10.3860 +0.76% -0.02% +10.4930 +10.3689
Dollar/Sweden 8.3579 8.2988 +0.28% +1.97% +8.4007 +8.2908
Euro/Sweden 10.1139 10.0858 +0.28% +0.37% +10.1345 +10.0848





(Reporting by Saqib Iqbal Ahmed and Karen Brettell in New York
Editing by Matthew Lewis)