Cryptocurrencies pause after weekend battering, other currencies wait for Fed

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HONG KONG — The dollar traded steady on

Monday ahead of the US Federal Reserve’s January policy

meeting later this week, while bitcoin lay bruised near a

six-month low hit over the weekend, hurt by a sell-off in

technology stocks.

“The Fed has got markets by the leash. And this week, it

will once more tug and yank,” said Frederic Neumann, HSBC’s

co-head of Asian economics research, in a morning note.

Attempts to predict when and how quickly central banks will

raise interest rates and conclude stimulus programs launched

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when COVID-19 hit are a major factor driving currency markets at

present.

“What will prompt investors to scurry about will be the

guidance Chair Powell might give at his press conference about

quantitative tightening later in 2022,” Neumann said, adding

that he was not expecting a policy change.

The Fed’s rate-setting Federal Open Market Committee kicks

off its two-day meeting on Tuesday with some analysts starting

to speculate that it is possible, though unlikely, that it will

raise interest rates for the first time since the pandemic

began.

“We consider the higher risk is the FOMC’s statement

portrays an urgency to act soon, likely in March, in the face of

very high inflation. The urgency could culminate in a decision

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to abruptly stop quantitative easing by mid-February,” said

analysts at Commonwealth Bank of Australia in a note.

“A bullish statement and/or a faster end to the QE program

could even encourage markets to price a risk of a 50bp rate hike

in March,” they added, saying they thought this would lead to a

knee-jerk reaction higher in the dollar.

The dollar index, which measures the greenback against six

major peers was steady at 95.682 on Monday morning.

Also on traders’ agenda this week is the Bank of Canada’s

January meeting, wrapping up just before the Fed, where a rate

hike is a possibility, and Australian inflation data due

Tuesday, which will guide the Reserve Bank of Australia’s stance

at its meeting next month.

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On Monday morning the Aussie dollar was at $0.7180, the

lower end of its recent range. The risk-friendly currency sold

off late last week as traders dumped assets like equities, as

well as even riskier assets like cryptocurrencies.

Bitcoin was at $36,026, having fallen 10% on

Friday and dropping as low as $34,000 on Saturday, its lowest

level since July 2021.

The world’s largest cryptocurrency has nearly halved in

value since its record peak of $69,000 hit November.

The sell-off hurt most digital assets, and ether,

the world’s second-largest cryptocurrency was at $2,516, also

having hit 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

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correlated with other risk assets.

The Nasdaq Composite lost 7.55% last week, its worst

week since March 2020.

Back in traditional currency markets, sterling was

near a two-week low at $1.3551, and the euro was at $1.1333.

The yen was at the stronger end of its recent range, with

one dollar at 113.7 yen not far from the 113.47 touched 10 days

earlier. A fall below that level would be a five-week low for

the dollar.

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Currency bid prices at 0032 GMT

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1333 $1.1342 -0.08% -0.31% +1.1350 +1.1333

Dollar/Yen 113.7950 113.6550 +0.00% -1.19% +113.8250 +0.0000

Euro/Yen

Dollar/Swiss 0.9130 0.9121 +0.03% +0.02% +0.9130 +0.9123

Sterling/Dollar 1.3549 1.3551 +0.00% +0.20% +1.3555 +1.3547

Dollar/Canadian 1.2571 1.2576 -0.04% -0.58% +1.2580 +1.2562

Aussie/Dollar 0.7178 0.7172 +0.08% -1.25% +0.7187 +0.7171

NZ 0.6708 0.6715 -0.06% -1.95% +0.6721 +0.6710

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Alun John)