By Tom Westbrook
SINGAPORE (Reuters) -The dollar held just below multi-month highs on Thursday, with a recovery in appetite for riskier assets pulling it off recent peaks, while sterling was pinned down ahead of a Bank of England meeting where investors anticipate a dovish tone.
At $1.1505 against the euro, the dollar hasn’t budged a great deal during the Asia day, although it was a fraction weaker than Tuesday’s three-month high of $1.1469.
Sterling was mostly steady at $1.3065 ahead of a 1200 GMT rates decision, having edged up from a seven-month low of $1.3011 overnight. [GBP/]
Investors see a roughly 40% chance the BoE will cut rates from the current level of 4%, especially since finance minister Rachel Reeves has hinted at tax hikes that could weigh on the economy.
In any case, a 25-basis-point reduction is priced in for early next year. So even if rates stay on hold on Thursday, the tone is likely to be dovish and point to a future cut.
“It’s difficult to see sterling getting a pop on this one. Even if they don’t cut… we think that they will signal that one is coming,” said National Australia Bank’s senior currency strategist, Rodrigo Catril, in Sydney.
A break below $1.30 would open the way to April’s low of $1.2712.
RISK REBOUND
The largest movers over the past 24 hours were the risk-sensitive Australian and New Zealand dollars which have tracked a rebound in the stock market, as a sharp selloff in technology shares abated. [MKTS/GLOB]
The Aussie is up about 0.9% since hitting a three-week low on Wednesday to trade at $0.6513 in the Asia afternoon. The kiwi lifted from a seven-month low to buy $0.5666. [AUD/]
Their gains came despite a sharp rise in U.S. yields that followed some encouraging U.S. labour data and hints from the Treasury Department of a future increase in debt sales.
“The market was a little bit more sensitive to the improvement in risk appetite,” said NAB’s Catril.
Bigger moves, however, and especially any durable fall in the dollar would need a clearer picture of the U.S. economy than is currently available, he said, with investors and policymakers flying blind as a prolonged government shutdown halts data publication.
“The dollar carries better than the yen or the euro,” he said, referring to higher U.S. government bond yields. “So for now, gravity tells you the dollar will be supported.”
The dollar has been steady against the yen at 153.98 yen. The dollar index held at 100.06.
Cryptocurrency bitcoin has found a foothold above $100,000 and last bought $104,000.
(Reporting by Tom Westbrook; Editing by Shri Navaratnam and Neil Fullick)
