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Dollar drifting as traders turn to central bankers

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SINGAPORE — The dollar hovered near recent

lows on Tuesday as traders braced for a slew of central bank

meetings from Australia to Europe and Canada this week, looking

for any signs that they are making progress towards policy

normalization.

The possibility of a tapering delay in the United States,

after weaker-than-expeced jobs data on Friday, has put extra

focus on policymakers elsewhere and put pressure on the dollar.

First up is Australia, where an announcement is due at 0430

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GMT. The Australian dollar has paused a recent rally as markets

wait to see whether lockdowns in Sydney and Melbourne have

derailed plans to taper bond purchases.

The Aussie last bought $0.7447.

If the central bank pauses its tapering plans, traders are

likely to sell the currency, possibly pushing the Aussie towards

its support level around $0.7420, according to IG Markets

analyst Kyle Rodda. A hawkish central bank would send the

currency higher, he said.

Markets are also awaiting Chinese trade data due around 0300

GMT, expected to be weighed down by a slowdown in growth and

disruption from COVID-related port closures.

On Wednesday, the Bank of Canada is expected to keep rates

steady, but to maintain on course for a hike before the end of

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the year, shaking off a surprise contraction in the Canadian

economy in the second quarter.

The Canadian dollar is hovering near its highest

level in about three weeks and is above its 200-day moving

average at C$1.2525 per dollar.

The main event of the week falls on Thursday when the

European Central Bank meets, with the focus on a potential cut

to the pace of bond purchases, particularly following some

hawkish comments from policymakers last week.

A majority of economists polled by Reuters expect a slowdown

in ECB bond purchases, especially after data last week showed

inflation surging to a 10-year high. But an overnight rally in

stocks and a dip in the euro suggests traders may not be betting

on such a scenario.

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After touching a one-month high in the wake of disappointing

U.S. labor data on Friday, the euro has been unable

to hold above $1.19 and last bought $1.1881. The pan-European

STOXX 600 index is within a whisker of a record high.

Elsewhere the Japanese yen was firm at 109.76 per

dollar and sterling was steady at $1.3848. The New

Zealand dollar edged 0.3% higher as the country appears

to be containing a coronavirus outbreak and swaps markets are

pricing in nearly 100 basis points of policy tightening by May.

Looming over the market and the central bank meetings this

week is the stance of the U.S. Federal Reserve, which has

flagged asset purchase tapering before year’s end but has said

it depends on labor markets which are suddenly looking wobbly.

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Friday’s payrolls figures, which showed 235,000 jobs created

last month against economists’ expectations of 728,000 were

enough to sink chances of a tapering announcement this month,

said NatWest’s head strategist John Briggs in a note – but it

won’t be clear for another month how long the delay may be.

“It does not necessarily derail our current timeline of a

November announcement for December start,” Briggs added said.

“The next payroll report on October 8th now looms very large as

the main event in considering the timing of tapering.”

In cryptocurrencies, bitcoin held above $50,0000

at $52,497 and smaller rival ether traded little

changed at $3, 897 after topping $4,000 last week for the first

time since mid-May.

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

Currency bid prices at 0135 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1884 $1.1872 +0.11% -2.73% +1.1886 +1.1871

Dollar/Yen 109.7600 109.8450 -0.08% +6.26% +109.8450 +109.7550

Euro/Yen

Dollar/Swiss 0.9137 0.9151 -0.15% +3.28% +0.9153 +0.9137

Sterling/Dollar 1.3854 1.3840 +0.10% +1.40% +1.3854 +1.3838

Dollar/Canadian 1.2525 1.2534 -0.09% -1.66% +1.2540 +1.2523

Aussie/Dollar 0.7454 0.7440 +0.19% -3.09% +0.7456 +0.7435

NZ 0.7146 0.7134 +0.20% -0.45% +0.7153 +0.7133

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Ana Nicolaci da Costa)

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