Cryptocurrencies pause after weekend battering, other currencies wait for Fed

Representations of the virtual currencies Ripple, Bitcoin, Etherum and Litecoin are seen on a PC motherboard in this illustration image, February 14, 2018. REUTERS/Dado Ruvic/Illustration

HONG KONG, Jan 24 (Reuters) - The dollar traded flat on Monday ahead of the U.S. Federal Reserve's monetary policy meeting later this week, while bitcoin was hit near a six-month low. months over the weekend, hit by a selloff in tech stocks.

"The Fed has the markets on a leash. And this week, once again push and pull," Frederic Neumann, co-head of HSBC Asian economic research, said in a morning note.

Attempts to predict when and how quickly central banks will raise interest rates and end stimulus programs launched when COVID-19 hit is a major factor driving currency markets today.

“What will get investors scrambling will be the guidance that Chairman Powell might give at his press conference on quantitative tightening later in 2022,” Neumann said, adding that he did not expect a change in policy.

The Fed's rate-setting Federal Open Market Committee kicks off its two-day meeting Tuesday with some analysts beginning to speculate that it is possible, though unlikely, that it will raise interest rates for the first time since the pandemic began. .

"We see the biggest risk as the FOMC statement reflecting the urgency to act soon, likely in March, in the face of very high inflation. The urgency could culminate in a decision to abruptly stop quantitative easing in mid-February," they said. analysts at Commonwealth Bank of Australia in a note.

“A bullish statement and/or a quicker end to the QE program could even encourage markets to price in the risk of a 50bp rate hike in March,” they added, saying they thought this would lead to a knee-jerk reaction. up in the dollar. .

The dollar index, which measures the dollar against six major pairs, was flat at 95.682 on Monday morning.

Also on the agenda for traders this week is the Bank of Canada's January meeting, which wraps up just before the Fed, where there is a chance of a rate hike, and Australian inflation data due out on Tuesday, that will guide the position of the Reserve Bank of Australia at its next meeting. month.

On Monday morning, the Australian dollar was at $0.7180, the lower end of its recent range. The risk-friendly coin sold off late last week as traders dumped assets like stocks, as well as even riskier assets like cryptocurrencies.

Bitcoin was at $36,026, having fallen 10% on Friday and falling as low as $34,000 on Saturday, its lowest level since July 2021.

The world's largest cryptocurrency has nearly halved in value since hitting its record high of $69,000 in November.

The sell-off hit most digital assets, with ether, the world's second-largest cryptocurrency, at $2,516, also hitting its lowest level since July on Saturday, which was $2,300.

Traders say that as institutional investors increase their exposure to cryptocurrencies, their moves are more closely tied to other risky assets.

The Nasdaq Composite (.IXIC) it lost 7.55% last week, its worst week since March 2020.

Turning to traditional currency markets, the British pound was near a two-week low at $1.3551 and the euro at $1.1333.

The yen was at the stronger end of its recent range, with the dollar at 113.7 yen not far off the 113.47 hit 10 days earlier. A drop below that level would be a five-week low for the dollar.

==================================================== ======

Currency Offer Prices at 0032 GMT

All the places

Tokyo places

europe places

volatilities

BOJ Tokyo Forex Market Information

Report by Alun John

Our standards: The Thomson Reuters Trust Principles.