News: FOREX-Dollar finds a footing as traders brace for hawkish Fed

Dollar holds Friday's jump in Asia
Bounce extends to 114.45 yen; Fed funds futures fall
China makes surprise 10 bps MLF cut
The dollar clung to a late week bounce on Monday as investors braced for January's U.S. Federal Reserve meeting and raised bets it will chart a year ahead holding several rate hikes, while China surprised analysts with a benchmark cut.
Chinese economic growth data, due later on Monday (0200 GMT), a Bank of Japan policy meeting which concludes on Tuesday, British inflation data on Wednesday and Australian jobs figures on Thursday are also in view as traders gauge the global policy outlook.
The dollar was 0.2% higher at 114.45 yen JPY=EBS early in the Asia session, about 0.8% above a Friday low. It also edged about 0.1% firmer on the euro EUR=EBS to $1.1403.
The moves follow the dollar's jump on Friday along with U.S. yields and underscore support for the greenback from the hawkish rates outlook, even if momentum for gains has started to wane.
The U.S. dollar index =USD , which declined sharply last week until Friday's leap, sat at 95.225 in Asia on Monday.
"Friday's move suggest to me that the interest rate driver for dollar strength is not dead and buried," said National Australia Bank's head of foreign exchange strategy Ray Attrill.
He said it may not necessarily return to drive new dollar highs, but added: "We've had a hawkish twist out of every Fed meeting since June last year."
The Fed meets Jan. 25-26 and is not expected to move rates, but there is a growing drumbeat of hawkish comments coming from within and outside the central bank.
Last week, J.P. Morgan CEO Jamie Dimon remarked that there could be "six or seven" hikes this year and billionaire hedge fund manager Bill Ackman floated on Twitter over the weekend the possibility of an initial 50 basis point hike to tame inflation.
The cash Treasury market was closed for a holiday on Monday but 10-year futures TNc1 were sold to a two-year low and Fed funds futures 0#FF: also fell, reflecting a strengthening conviction in the market of at least four hikes in 2022.
The Australian and New Zealand dollars, which dropped sharply on Friday, remained under pressure on Monday. The Aussie AUD=D3 was last down 0.2% at $0.7200, ending for now a brief foray above resistance around $0.7276.
The kiwi NZD=D3 edged 0.2% lower to $0.6791. In China, bonds rallied and the yuan slipped after the central bank cut borrowing costs for medium-term loans for the first time since April 2020, defying market expectations.
Ten-year government bond futures CFTc1 rose to their highest since June 2020 after the move and the yuan CNY=CFXS began onshore trade marginally softer at 6.3555 per dollar.
Chinese gross domestic product figures due at 0200 GMT are expected to show annual growth at its slowest in 18 months as a property downturn drags on demand.
Elsewhere a month-long rally for sterling GBP=D3 has petered out around its 200-day moving average. It held at $1.3669 on Monday, but analysts say it could resume gains if inflation data makes the case for higher interest rates.
"Interest rate markets are currently pricing an 80% + chance of a 25 bp rate hike by the Bank of England on 3 February," said Commonwealth Bank of Australia strategist Joe Capurso.
"A quicker pace of inflation could see pricing move closer to 100%."
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	Currency bid prices at 0139 GMT 
 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.1402		$1.1417	 -0.13%		 +0.29%	  +1.1425	 +1.1401 
 Dollar/Yen		JPY=EBS	114.4500	   114.2250	+0.20%		 -0.50%	  +114.5050   +114.2800 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9156		 0.9140	  +0.17%		 +0.37%	  +0.9158	 +0.9143 
 Sterling/Dollar   GBP=D3	 1.3665		 1.3685	  -0.14%		 +1.05%	  +1.3675	 +1.3665 
 Dollar/Canadian   CAD=D3	 1.2549		 1.2557	  -0.06%		 -0.74%	  +1.2555	 +1.2539 
 Aussie/Dollar	 AUD=D3	 0.7200		 0.7218	  -0.24%		 -0.95%	  +0.7224	 +0.7199 
 NZ				NZD=D3	 0.6790		 0.6810	  -0.28%		 -0.78%	  +0.6820	 +0.6791 
 Dollar/Dollar																				   
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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