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Dollar pauses for breath as euro and pound try to rebound


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SYDNEY/LONDON — The dollar on Tuesday

took a pause in what has been a relentless climb higher as the

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euro and even the besieged Japanese yen and British pound

managed to recover a little ground, but medium-term fundamentals

were still in the greenback’s favor.

The euro rose 0.42% to $0.9647, sterling

climbed nearly 1% to $1.0783, and the dollar slid 0.33% against

the yen to 144.25.

These moves were minor however compared to the multi-year

lows at which all three currencies are languishing. The euro was

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still near its 20-year trough hit the day before, and the yen

was just off its 24-year nadir hit last week before Japanese

authorities intervened to strengthen the currency.

Sterling was not too far from its record low against the

dollar of $1.0327 hit Monday, the end of a plunge that began

Friday when markets were spooked by Britain’s gambit of relying

on unfunded tax cuts to spur growth, which also sent short-term

gilt yields up 100 bps in two days.

“Everyone’s got this hope that the dollar is peaking and

peaking and peaking, but it’s just been far too premature,” said

Paul Mackel, global head of FX research at HSBC.

“The Fed is firmly hawkish and global growth is weakening,

and you put those forces together alongside higher elements of

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risk aversion – it’s all pointing to a strong dollar if not a

strengthening dollar.”

The dollar index was at 112.39 on Tuesday, down 0.7%

on the day, with the decline in the safe haven broadly in line

with a recovery in markets’ sentiment towards riskier assets,

which also boosted European stocks and U.S. share futures.

The greenback’s gains against the pound have been the most

dramatic, and traders on Tuesday were waiting for the appearance

by the Bank of England’s chief economist, Huw Pill, at a panel

event at 1100 GMT.

The central bank, on Monday, said it would not hesitate to

change interest rates and was monitoring markets “very closely,”

though did not take any more dramatic action.

While sterling’s climb Tuesday has seen it pare most of the

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previous day’s losses, Qi Gao, currency strategist at Scotiabank

in Singapore said it might be “short lived.” The currency is

still down 20% this year against the backdrop of a stronger

dollar.

“More BoE rate hikes could only briefly boost the pound but

not on a sustainable basis,” said Gao.

The Aussie and kiwi hit 2-1/2 year lows on

Monday were also on the rebound with the Aussie up 0.57% to

$0.6490 and the kiwi up 1.2% to $0.5702.

China’s yuan also hit a 2-1/2 year low on Monday

and was broadly steady at 7.1538 on Tuesday.

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

Currency bid prices at 0754 GMT

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

Previous Change

Session

Euro/Dollar

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$0.9646 $0.9609 +0.39% -15.15% +0.9670 +0.9584

Dollar/Yen

144.3250 144.7000 -0.25% +25.49% +144.7050 +144.0800

Euro/Yen 139.21 139.07 +0.10% +6.84% +139.5400 +138.7100

Dollar/Swiss

0.9891 0.9926 -0.32% +8.47% +0.9941 +0.9870

Sterling/Dollar

1.0803 1.0690 +1.06% -20.12% +1.0837 +1.0651

Dollar/Canadian

1.3658 1.3728 -0.50% +8.03% +1.3741 +1.3641

Aussie/Dollar

0.6493 0.6459 +0.50% -10.70% +0.6513 +0.6452

NZ

Dollar/Dollar 0.5702 0.5635 +1.23% -16.66% +0.5722 +0.5635

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Sam Holmes)

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