News: FOREX-Dollar hovers near one-month high with market frozen before Fed test

• Dollar has been buoyed as cautious investors close shorts
• Currency market volatility wallows at 16-month low
• Traders watching for clues on timing of Fed tapering

The dollar hovered below a one-month high compared with major peers on Tuesday ahead of a much-anticipated Federal Reserve meeting that could signal a change in the outlook for U.S. monetary policy.

The U.S. currency has been buoyed as traders closed short positions before the Fed's two-day policy-setting confab, which kicks off on Tuesday.

The dollar index =USD , which measures the greenback against a basket of six currencies, was flat early in Asia at 90.517. It has pushed briefly above 90.60 in each of the last two sessions, and 90.63 would be the strongest level since May 14.

Traders will be watching carefully for clues on when policymakers will start tapering dollar-depreciating stimulus.

So far Fed officials, led by Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come, although recent economic data has raised concerns that price pressure after the post-COVID-19 economic reopening could force an earlier stimulus withdrawal.

"While Powell will tread carefully, I expect that the Fed is warming to a more open discussion about tapering, to be formally announced in the September meeting," Chris Weston, head of research at broker Pepperstone in Melbourne, wrote in a note to clients.

"Any view that cements a formal announcement in September should be modestly USD bullish, but the risks are symmetrical as Powell will be keen to not hurt financial conditions," he wrote.

Nearly 60% of economists in a Reuters poll expect a tapering announcement in the next quarter, despite a patchy recovery in the job market.

Currency markets settled in tight ranges with implied volatility plumbing multi-month lows after last week's strong inflation readings and a dovish European Central Bank meeting failed to dislodge currencies from recent trading levels.

The Deutsche Bank FX Volatility Index .DBCVIX plunged to 5.6 on Friday, its lowest in nearly 16 months, and remained just above that level this week.

The euro EUR=EBS was little changed at $1.21185 on Tuesday, near an almost one-month low at $1.20930 reached on Friday.

The yen JPY=EBS was at 110.075 per dollar, almost flat from Monday, after a more than 0.3% slide in each of the past two sessions.

In cryptocurrencies, bitcoin BTC=BTSP traded above $41,000 for the first time in more than two weeks on Monday, and was last around $40,495 after rallying from below $35,000 on Sunday after Tesla Inc TSLA.O boss Elon Musk tweeted that the electric carmarker would resume allowing bitcoin transactions when miners who verify transactions use more renewable energy.

Ether ETH=BTSP also got a small lift in sympathy with its bigger rival, but remained well within recent ranges at $2,605.54 on Tuesday.

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	Currency bid prices at 020 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.2118		$1.2121	 -0.02%		 -0.82%	  +1.2123	 +1.2114 
 Dollar/Yen		JPY=EBS	110.0700	   110.0650	+0.01%		 +6.57%	  +110.0800   +110.0600 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.8995		 0.8995	  +0.02%		 +1.69%	  +0.8997	 +0.8997 
 Sterling/Dollar   GBP=D3	 1.4112		 1.4105	  +0.05%		 +3.29%	  +1.4112	 +1.4105 
 Dollar/Canadian   CAD=D3	 1.2139		 1.2149	  -0.04%		 -4.63%	  +1.2147	 +1.2140 
 Aussie/Dollar	 AUD=D3	 0.7712		 0.7712	  +0.01%		 +0.26%	  +0.7716	 +0.7709 
 NZ				NZD=D3	 0.7148		 0.7144	  +0.02%		 -0.49%	  +0.7148	 +0.7143 
 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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