U.S. dollar held above inflation ahead of European Central Bank meeting

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U.S. dollar held above inflation ahead of European Central Bank meeting

The dollar held above inflation and ECB DXY at 90.090, EUR US Dollar up on Wednesday as traders looked to the upcoming World Central Bank rate and a European Central Bank meeting to gauge the pace of global recovery and policymakers' thinking about lifting back on stimulus. Investors have piled up bets against the dollar, but are growing nervous about whether the beginning of the monetary stimulus is imminent and worry that interest rate increases could end a 15-month dollar downtrend. Some think the tapering could be boosted and the dollar strengthened if U.S. inflation is running hotter than the $0.4% monthly rate that economists expect. For the ECB, the focus is on any signs of an imminent slowdown in its bond buying program. Both are due on Thursday and the anticipation has all but killed volatility in major currencies, as traders assume a wait-and-see position. The dollar was stabilized in the Asia session at USD 1.2179 and the euro level at 109.47 US Dollar yen was maintained. On Tuesday, the Currency Volatility Index of Deutsche Bank hit its lowest level since February 2020. The US dollar indice was 00.990. Markets need reassurance that the global economic recovery is not under threat from either dangerous strains of COVID, or from Fed being forced to change tactic much earlier than expected, said Societe Generale currency strategist Kit Juckes. So far, the vaccines seem to work and while distribution is uneven it remains overall, he said. What is an avenue for hope? However, market fluctuations mean risk assets need regular reassurance that the Fed isn't going to tighten sooner than expected. Consequently, we wait for Thursday's CPI data then FOMC next week. The Australian and New Zealand dollar were completely anchored in narrow bands, with the Aussie at $0.7741, roughly the middle of the past two months range, and the Kiwi weighed likewise at $0.7197. Sterling has also shrunk as doubt is creeping in over whether the rising cases of the coronavirus Delta variant in Britain could delay business reopening plans for 21 June. It last bought $1.4155. BOC, ECB, CPI Proposing the U.S. inflation figures, Chinese producer price data for May showed the biggest jump in a dozen years – signalling that factories are not absorbing higher raw material costs and that price pressure is flowing down supply chains. The currency traders were also on the edge ahead of a central bank meeting on Wednesday. The bank is expected to remain rates on hold, but flag further downgrading of asset purchases, with any surprises on the size or speed liable to boost loonie. However, the week's main focus is on inflation, and the ECB and traders see both events as bringing risks on all sides. The US economists expect a monthly increase of 0.4% in the headline and the big inflation numbers - they're big numbers, said Commonwealth Bank of Australia currency strategist Joe Capurso. I think the risk is they are not that serious if they fall short, he said. This would drive US yields down and spooked the dollar, Capurso said, unless the figure spooked the stock markets enough to remove safe-haven flows into the currency. The ECB is expected to make policy settings steady, but the euro is likely to be delicate to changes in the bank's economic forecasts or any signals that the rate of bond buying could be slowing in months ahead. On Wednesday, China's yuan was steady around the 6.4-per dollar level as a bill aimed at competition with China cleared the U.S. Senate, dampening the yuan bulls' recent enthusiasm. On Tuesday the bitcoin collapsed after a three-week low from which it hit when signs of institutional investor caution and regulatory attention motivated the selling. It bought and invested for the last $32,754. Currency bid Prices at 444 GMT Description RICs Last U.S. Close - 0.32% 1.2185 1.2172 Dollar Yen 109.4650 0.03% 1.33% 0.8963 Switzerland Dollar $1.3155 1.4153 0.66% 1.4168 1.4148 Dollar Canadian 1.2108 0.7737 0.299 0.583 0.08% 0.25% 4.90% 1.2117 Dollar All Trottees Tokyo Forex Market Info

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