FOREX-Dollar holds at one-week highs as yuan outperforms

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Saikat Chatterjee
LONDON, Jan 26 (Reuters) - The dollar held at a one-week
high on Tuesday as doubts over the speed and size of U.S.
stimulus discouraged risk-taking in currency markets, with the
Chinese yuan the only notable exception.
London trading had a cautious tone after a turbulent Asian
session with currencies including the Australian dollar and the
euro under selling pressure before this week's Federal Reserve
policy meeting.
"FX markets are generally risk-off today with the dollar
higher, but the Chinese yuan is among the only currencies in
emerging markets holding firm," said Kenneth Broux, a strategist
at Societe Generale in London.
Against a basket of other currencies =USD , the dollar rose
0.2% to 90.65, its highest since Jan. 20. It has strengthened
1.6% in three weeks as U.S. Treasury yields rose, after a 6%
drop between September and January.
Riskier currencies, including the Australian dollar and the
British pound, led losers as some traders unwound large short
dollar bets. Short dollar positions 0#NETUSDFX= had hit their
highest in almost 10 years, data last week showed.
The euro was also weighed down by early signals that the
economy may not rebound as strongly this year as predicted.
Germany's Ifo business climate indicator undershot expectations
on Monday and an economic surprise index in Europe .CESIEUR is
near six-week lows.
The Chinese yuan was the rare outperformer against the
dollar, even as a senior policymaker warned of debt risks.
China's monetary policy will continue to support economic growth
and the central bank will watch debt and non-performing loan
risks, central bank Governor Yi Gang said. STRONGER
U.S. Senate Majority Leader Chuck Schumer said Democrats may
try to pass much of President Joe Biden's $1.9 trillion spending
package with a majority vote, but it is not clear if they have
the numbers to override Republican objections. Few if any changes are expected to the Fed's policy
statement on Wednesday after its two-day meeting and no new
economic forecasts are scheduled to be released. "The U.S. economy is probably somewhat stronger than some of
the other major economies," said John Vail, chief global
strategist at Nikko Asset Management in Tokyo. "People will
start to think the United States will settle down, which in
theory could be dollar-supportive."
The euro EUR=EBS , which fell on Monday after the Ifo
survey showed German business morale slumping, is also trading
in a range between support around $1.2050 and resistance at
$1.2215. It slipped 0.2% to $1.2126.
Elsewhere, emerging-market currencies remained under
pressure, with the Brazilian real BRL= and the Mexican peso
MXN= stabilising after a selloff in the past 48 hours.

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World FX rates https://tmsnrt.rs/2RBWI5E
FX market positions https://tmsnrt.rs/2Yhdyvu
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