TOKYO/SINGAPORE (Reuters) – The dollar hovered below recent peaks on Tuesday as investors looked to U.S. policymakers for clues on whether they may seek to slow rising yields, while the New Zealand dollar dropped after housing reforms cooled policy-tightening expectations.
The Turkish lira also showed some sign of stability following a 7.5% dive on Monday after President Tayyip Erdogan sacked a hawkish central bank chief, but markets’ relief was offset by worries about fresh lockdowns in Europe.
The New Zealand dollar hit a three-month low after the government introduced taxes to curb housing speculation, a move investors reckoned could allow the central bank to hold interest rates lower for longer with less risk of a property bubble.
“The Reserve Bank (of New Zealand) will … likely revise down its house price forecasts,” ANZ Bank analysts said in a note. “This will add caution around official cash rate hikes via less-than-otherwise housing-induced domestic momentum.”
The kiwi lost as much as 1% and traded at $0.7093 during the Asian afternoon. The move also rallied Kiwi bonds, especially at the short end, and it pulled the Australian dollar about 0.4% lower to $0.7711. [AUD/]
Sterling slipped almost 0.2% to $1.3845 and oil linked currencies also fell with crude prices on worries that a new wave of infections will bring more lockdowns in Europe.
The Canadian dollar dipped to C$1.2544 per dollar and the Norwegian crown fell about 0.2% as well, as benchmark Brent crude futures dropped more than 1%.[O/R]
Germany is extending its lockdown until April 18 and calling on citizens to stay home over Easter and Chancellor Angela Merkel warned: “we are now basically in a new pandemic,” as more transmissible virus variants sweep the continent.
The broad U.S. dollar index, which measures the greenback against a basket of six major currencies stood almost flat in Asian trade at 91.831 after a slip of 0.32% on Monday.
The pause follows a 2.0% gain so far this quarter, as speedy rollouts of COVID-19 vaccines in the United States and the Biden Administration’s $1.9 trillion stimulus are seen lifting growth, driving up bond yields and drawing investors.
The dollar’s attraction was further boosted as U.S. Federal Reserve officials appeared to tolerate recent rises in yields – turning the focus now to Congressional testimony by Fed Chair Jerome Powell and Treasury Secretary Janet Yellen later on Tuesday.
“U.S. bond yields could rise further as the market may try to find out where the pain threshold for the Fed is,” said Minori Uchida, chief currency analyst at MUFG Bank.
For now, though, the 10-year U.S. bond yields eased to 1.668% after peaking at 1.754% on Thursday, keeping the dollar in check.
“The market is interested in how far U.S. bond yields will rise. While top Fed officials have said they will keep interest rates low through 2023, there could be dissenting voices,” said Yukio Ishizuki, senior strategist at Daiwa Securities.
The Turkish lira traded at 7.8500 per dollar after a steep fall on Monday to as low as 8.485, near its record low of 8.58.
The lira’s massive fall, however, has done little so far to shake investors’ confidence in emerging market currencies as the event, the third firing of a central bank chief by Erdogan since 2019, was not perceived to hold wider risk.
The MSCI emerging market currency index dipped only slightly on Monday and steadied on Tuesday. China’s yuan also held steady despite U.S. and European sanctions, and traded at 6.5095 per dollar.
Bitcoin stood at $54,586, having fallen almost 5% on Monday to trade near last week’s low of $53,221.
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