News: FOREX-Dollar stems losses ahead of U.S. midterms

The dollar steadied on Tuesday as some of the momentum ebbed out of bets on China's reopening that had been weighing on the safe haven currency, and as traders looked ahead to U.S. midterm elections later in the day.

A conclusive result could take days, but forecasts are for a Republican victory, at least in the House of Representatives and consequently likely gridlock in Congress.

Some analysts say that outcome could be positive for bonds and negative for the dollar if it leads to less fiscal stimulus.

"If we get a gridlock outcome or Republican sweep, it won't be so easy to get fiscal stimulus through next year, which means then that (Federal Reserve chair Jerome) Powell can afford to take the foot off the interest rate hike accelerator," said Damien Boey, chief macro strategist at Barrenjoey in Sydney.

The aggressive pace of U.S. rate hikes has caused U.S. Treasury yields to rise and pushed the dollar to multi-year highs against most major peers, though speculation is growing that this trend is starting to come it its end.

The euro EUR=EBS touched $1.003 in Asia trade, its highest in nearly two weeks, before sliding to trade down a touch straddling the $1 level.

Sterling GBP=D3 also fell, down 0.37% at $1.1473, but along with the risk friendly Australian dollar and currencies like the Swedish crown SEK=D3 that often move in line with overall market sentiment, the pound was well off its recent lows.

"The question is the cycle turning for the U.S dollar?" said Kenneth Broux senior FX strategist at Societe Generale.

"The main take-away from last week's FOMC is that the dollar has failed to return to the highs despite the repricing of the terminal rate, so perhaps we are reaching a point of exhaustion in the dollar's move higher."

"Only the future and hindsight can tell us for sure though." The U.S. Federal Reserve's rate setting committee increased rates by 75 basis points last week and Chair Jerome Powell indicated that hikes would continue, causing markets to reprice expectations of the point at which they would peak.

The Japanese yen JPY=EBS hit a one-week high of 146.35 per dollar. Japanese foreign currency reserves posted the second-sharpest monthly decline on record in October as authorities spent 6.35 trillion yen intervening to support the yen.

COVID POLICY Another factor that has weighed on the dollar in recent days was speculation that China might relax aspects of its dynamic zero COVID policy.

China's strict virus policy includes lockdowns, quarantining and rigorous testing, and officials said over the weekend the measures are "completely correct" and will stay. But incremental adjustments have been enough to keep traders' from despair.

The yuan had its best day in two years on Friday, and has held most of those gains since, but gave back a little bit through Tuesday to trade at 7.2612 per dollar CNY=CFXS as fresh COVID-19 outbreaks chipped away at some of the optimism.

The growth-sensitive Australian and New Zealand dollars, carried along for the ride, leaving the Aussie AUD=D3 at $0.6462 and the kiwi NZD=D3 at $0.5915, after earlier touching a seven-week high of $0.5951.

"Where there's smoke, eventually there's fire, so the market is pricing in improved optimism, though at the moment it's all based on hopes," said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

In cryptocurrencies, bitcoin BTC=BTSP fell as much as 6% to as low as $19,351 and ether ETH=BSTP dropped sharply in moves traders said were linked to concern surrounding brokerage FTX, after rival Binance said it would liquidate holdings of FTX's native token.

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	Currency bid prices at 0919 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS																	   

							  $0.9988		 $1.0017	-0.31%		  -12.16%	 +1.0031	 +0.9972 
																								 
 Dollar/Yen		JPY=EBS																	   

							  146.4100		146.4950   -0.05%		  +27.30%	 +146.9250   +146.3600 
																								 
 Euro/Yen		 
				  S>		  146.22		  146.91	 -0.47%		  +12.20%	 +146.9900   +146.2200 
																								 
 Dollar/Swiss	  CHF=EBS																	   

							  0.9895		  0.9887	 +0.09%		  +8.49%	  +0.9923	 +0.9880 
																								 
 Sterling/Dollar   GBP=D3																		

							  1.1459		  1.1516	 -0.53%		  -15.30%	 +1.1535	 +1.1450 
																								 
 Dollar/Canadian   CAD=D3																		

							  1.3521		  1.3492	 +0.22%		  +6.94%	  +1.3527	 +1.3478 
																								 
 Aussie/Dollar	 AUD=D3																		

							  0.6461		  0.6482	 -0.30%		  -11.10%	 +0.6490	 +0.6445 
																								 
 NZ				NZD=D3																		

 Dollar/Dollar				0.5915		  0.5941	 -0.45%		  -13.59%	 +0.5952	 +0.5899 
																								 
																								 
 All spots  FX=  
Tokyo spots  AFX=  Europe spots  EFX=   Volatilities  FXVOL=   Tokyo Forex market info from BOJ  TKYFX  
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World FX rates	https://tmsnrt.rs/2RBWI5E 

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