FOREX-Dollar squeezed anew as stimulus hopes brighten mood

* Monday's risk-averse moves unwind as Yellen urges spending
* Euro gains on bright German investor sentiment, Italian
politics
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Jan 20 (Reuters) - The U.S. dollar came under
gentle pressure in Asia on Wednesday and the euro found support
as investors were buoyed by ebbing political turmoil in Italy,
improving sentiment in Germany and a renewed focus on U.S.
pandemic relief spending.
While the world will be watching Joe Biden's inauguration as
U.S. President at noon in Washington (1700 GMT), traders were
more focused on his policies than the ceremony.
U.S. Treasury Secretary nominee Janet Yellen urged lawmakers
to "act big" on stimulus spending at her confirmation hearing
and said she believes in market-determined exchange rates,
without expressing a view on the dollar's direction.
The dollar index backed away from a one-month high
after her remarks and benchmark ten-year U.S. Treasury yields
, which have lately surged on borrowing expectations,
slipped a little in their steadiest session of 2021 so far.
The dollar index was steady at 90.379 on Wednesday.
The euro climbed as far as $1.2150, having
extended gains made overnight, when it bounced off support
around $1.2050 after the Italian government survived a
confidence vote and a ZEW investor sentiment survey beat
forecasts.
The risk-sensitive Australian and New Zealand dollars edged
up to also hold modest gains. The Aussie was last up
0.3% at $0.7719 and the kiwi up 0.2% to $0.7130.
"We think Yellen is at best indifferent to a weakening
dollar, and that in itself may be insufficient to turn the
tide," said OCBC Bank strategist Terence Wu, referring to a
downtrend that has seen the dollar index lose about 12% since
last March.
"Coupled with the market re-focusing on fiscal stimulus, the
underlying risk-on, weak-dollar dynamic may re-assert
dominance," he said, leaving the bank bearish on the dollar as
the effects of the recent gains in U.S. yields fade.
Positioning data shows investors overwhelmingly short
dollars as they figure budget and current account deficits will
weigh on the greenbacks.
Analysts at Nomura said last year's downtrend might resume
again soon and were confident enough to suggest adding to bets
the greenback will drop against the South Korean won,
which it did slightly through the Asia session.
The euro was steady on the pound and held gains
against the yen.
The safe-haven yen had been sold broadly as risk
sentiment improving mood on Tuesday, but caution in Tokyo, where
equities slipped, supported it against the dollar. The yen last
changed at 103.76 per dollar.
Sterling rose marginally to $1.3651, drawing support
from a prediction by the Bank of England's chief economist that
Britain's economy would begin to "recover at a rate of knots" in
the second half of the year.
China's yuan gained 0.2% to 6.4683 onshore despite
the People's Bank of China injecting 280 billion yuan into
short-term funding markets to offset seasonal cash demands as
well as a surge of money in to Hong Kong stocks.
There was no change to China's benchmark lending rates, as
expected.
Elsewhere in Asia, Malaysia's central bank was due to the
announce the outcome of its policy review at 3 p.m (0700 GMT).
Nine of 15 economists polled by Reuters expect it will cut
benchmark interest rates to historic lows.
Over in Canada, analysts saw a small chance of a 'micro rate
cut," with the central bank moving its benchmark rate by less
than 25 basis points, avoiding negative rates. A decision is due
at 1500 GMT. The loonie rose marginally to 1.2708 per
dollar.

========================================================
Currency bid prices at 1:15PM in Singapore (0515 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.2143 $1.2129 +0.12% -0.61% +1.2150 +1.2125
Dollar/Yen 103.7400 103.9100 -0.17% +0.43% +103.9250 +103.7300
Euro/Yen 125.97 126.00 -0.02% -0.75% +126.1700 +125.9700
Dollar/Swiss 0.8877 0.8885 -0.08% +0.35% +0.8887 +0.8875
Sterling/Dollar 1.3655 1.3636 +0.12% -0.07% +1.3656 +1.3632
Dollar/Canadian 1.2706 1.2732 -0.13% -0.15% +1.2735 +1.2708
Aussie/Dollar 0.7726 0.7696 +0.38% +0.43% +0.7727 +0.7693
NZ 0.7134 0.7117 +0.24% -0.65% +0.7134 +0.7118
Dollar/Dollar


All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ



(Reporting by Tom Westbrook; Editing by Lincoln Feast & Simon
Cameron-Moore)