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FOREX-Dollar buoyed as markets digest oil shock; Aussie sold

Published 17/09/2019, 07:23
© Reuters.  FOREX-Dollar buoyed as markets digest oil shock; Aussie sold
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* Dollar broadly supported as investors look to Fed

* Australian dollar falls after dovish RBA minutes

* Oil exporter currencies hold gains

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Hideyuki Sano and Tom Westbrook

TOKYO/SINGAPORE, Sept 17 (Reuters) - The greenback found

broad support on Tuesday amid the geo-political, and economic

uncertainties cast by the attacks on Saudi oil facilities, while

the Australian dollar was sharply sold after a dovish readout

from the central bank.

Oil prices pulled back from soaring heights touched on

Monday, and the yen JPY= and Swiss franc CHF= gave up gains

driven by knee-jerk safe-haven buying. O/R

The dollar rose to its strongest since Aug. 1 against the

yen, touching 108.36 yen, helped also by U.S. President Donald

Trump announcing he'd struck trade agreements with Tokyo.

Moves were slight, however, as traders await outcome of the

U.S. Federal Reserve policy meeting on Wednesday, with strong

expectations for a cut in interest rates, and Bank of Japan

meeting on Thursday that could result in more stimulus.

"The market is in limbo between the oil price shock and the

Fed meeting," said Matt Simpson, senior market analyst at Gain

Capital in Singapore.

"Like any price shock, people go: 'What the hell has

happened? What do we make of that...it didn't really spill over

to currency markets like we might have expected."

The dollar index .DXY held on to Monday's gains to stand

at 98.609. The euro stood a touch stronger at $1.1010 EUR= ,

while the Swiss franc CHF weakened slightly to $0.9919.

The Chinese yuan wavered, shedding 0.3%, as a lack of news

ahead of meetings scheduled on Thursday between junior U.S. and

Chinese trade officials began to sap markets' optimism about

chances of a breakthrough in negotiations to end a protracted

tariff war. The biggest major mover among major currencies was the

Australian dollar AUD=D3 , which dropped 0.4% to an 11-day low,

dragging the New Zealand dollar NZD=D3 with it, after the

Reserve Bank of Australia flagged an easing bias in meeting

minutes. "They no longer talk about an accumulation of evidence in

order to ease again, and highlight risks to the global economy,"

said National Australia Bank Senior FX Strategist Rodrigo

Catril. "It certainly sounds a lot more dovish than before."

Another factor boosting the greenback on Tuesday was some

exiting of bearish dollar bets in advance of the U.S. Federal

Reserve's two-day policy meeting.

Traders widely expect the Fed will cut interest rates by a

quarter of a percentage point on Wednesday.

But their certainty around the timing has faltered in recent

days, with the probability that the Fed will stand pat rising

from about a fifth to 33% this week, while expectations for two

more rounds of cuts by Christmas remain intact. FEDWATCH

"Markets are pricing in two additional rate cuts by next

year but the Fed is unlikely to make such a forecast, so we

could see further gain in the dollar," said Yukio Ishizuki,

senior strategist at Daiwa Securities.

Oil-producing currencies clung to Monday's gains in the wake

of attacks that have cut Saudi Arabia's production in half.

Yemen's anti-government Houthi movement, an ally of Iran,

claimed responsibility for the attack.

U.S. President Donald Trump said on Monday said it looked

like Iran was behind the strikes but stressed he did not want to

go to war. Iran has rejected the U.S. charges.

The Norwegian crown gained almost 1% Monday to trade at

9.8565 per euro EURNOK= while the Russian rouble

EURRUBTN=MCX hit a near seven-week high against the euro.

Each held those gains in Asian trade while oil importer

currencies weakened, with the South Korean won KRW= retreating

further from a two-month high touched on Monday, dropping 0.4%,

while the Taiwan dollar TWD= shed 0.2%.

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