The dollar is wallowing as traders reassess the timing of the tap; cryptocurrencies tumble

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By Stanley White and Kevin Buckland

TOKYO (Reuters) – The dollar was confined to a narrow trading range near multi-week lows against its major peers on Friday, as traders consider the next moves by major central banks ahead of a US Federal Reserve meeting next week.

Cryptocurrency ether fell more than 10%, and biggest rival Bitcoin slipped 5% amid speculation that US President Joe Biden’s plan to raise capital gains taxes limit investments in digital assets.

The euro fueled losses after European Central Bank President Christine Lagarde crushed expectations that policymakers would start to consider cutting bond purchases amid improving economic prospects.

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Fed Chairman Jerome Powell will likely repeat Lagarde’s message that it is premature to talk about tapering, which would put downward pressure on Treasury yields and cap the dollar’s gains against most currencies.

“Powell must reiterate the pursuit of easy monetary policy, as must Lagarde,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“As a result, the dollar is likely to fall against the yen, but the broader dollar trend is still mixed. The dollar may rise further against commodity currencies if commodity prices start to fall again.”

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The dollar slipped as low as 107.80 yen on Friday, the lowest since March 4.

The euro settled at $ 1.2027 after falling 0.2% on Thursday. It still wasn’t far from the seven-week high of $ 1.2080 set earlier this week.

The Australian and New Zealand dollars strengthened on Friday, but traders said risks were pointed to the downside due to a recent weakening in commodity prices.

The British pound was listed at $ 1.38535 after losing 0.6% the previous session.

The next Fed meeting ends on April 28, and while no major policy changes are expected, investors are paying close attention to any comments on the possibility of reducing monetary easing in the future.

Rising coronavirus vaccination rates and improving economic outlook are reasons for optimism, but investors are backing down on expectations of a withdrawal from monetary easing after Lagarde said the Discussions about phasing out emergency bond purchases were premature, analysts said.

Data on manufacturing activity and services in the United States and Germany is due later on Friday, which could support positive economic sentiment, but the dollar and euro are unlikely to move much as investors remain on the sidelines ahead of the Fed meeting, analysts said. .

In cryptocurrencies, the ether was around 7% lower at around $ 2,234 and had previously fallen to $ 2,116, retreating from the record high of $ 2,645.97 set Thursday after President Biden unveiled a plan to to almost double capital gains taxes for people earning more than a million dollars. .

Bitcoin fell 4.2% to less than $ 50,000 and briefly hit $ 48,338. It has fallen every day but two since it hit a record high of $ 64,895.22 on April 14.

(Reporting by Stanley White; Editing by Richard Pullin and Jacqueline Wong)



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