FOREX-Dollar holds near two-week lows as investors await Fed minutes

* Dollar index holds near two-week low
* Aussie, Kiwi dollar slip
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(Updates prices, adds comment)
By Elizabeth Howcroft
LONDON, April 7 (Reuters) - The dollar slipped, hovering
near two-week lows on Wednesday, after U.S. bond yields
stabilised, while market participants waited for the Federal
Reserve's meeting minutes later in the session to help determine
the dollar's future path.
The previous quarter saw a spike in U.S. Treasury yields and
the dollar's strongest rally in years, on rising expectations
that accelerating U.S. economic growth and inflation could force
the Fed to abandon its pledge to keep interest rates near zero
until 2024.
The International Monetary Fund said on Tuesday that
unprecedented public spending to fight the pandemic would push
global growth to 6% this year. But the bond market has stabilised this week, with the
10-year U.S. Treasury yield at 1.6579%, down from its peak of
1.776% at the end of March US10YT=RR .
"We have seen USD supported by rising bond yields most of
Q1.... now that Q2 has begun, yields are coming off slightly
which has softened the dollar in the last couple of days," said
Joe Tuckey, FX analyst at Argentex.
At 1100 GMT, the dollar was down 0.1% on the day at 92.21
against a basket of currencies, close to a two-week low, having
fallen from a high of 93.439 that it hit on March 30.
"I suspect that we are dealing with broad-based profit
taking on market USD longs," said Valentin Marinov, head of G10
FX research at Credit Agricole.
Marinov said that in the near-term U.S. Treasury yields and
global risk appetite would drive the currency market. As long as
yields stay within recent ranges, risk appetite could stay
strong, keeping the dollar on the back foot and supporting
riskier currencies, he said.
Market participants awaiting the release of Fed meeting
minutes later in the session for hints about the Fed
policymakers' views on rising yields.
"Investors will be scanning the minutes in search of any
'discomfort' among policymakers about rising inflation prospects
and in parallel any hint that the discussion is migrating
towards defining a timeline for tapering asset purchases," ING
strategists wrote in a note.
"Any (even mild) hawkish signal surely bears the risk of
hitting Treasuries, and providing some support to the dollar."
U.S. money markets are pricing in a 25 basis point hike in
December 2022.
Euro-dollar was up 0.1% at $1.18905 EUR=EBS . So far in
2021, the euro has fallen, with the euro-dollar pair driven by
prospects of the economic recovery from COVID-19 in Europe
lagging that of the United States and Britain.
Europe's benchmark equity index, the STOXX 600, closed at a
record high on Tuesday, recovering all of its pandemic-driven
losses. Euro zone business activity bounced back to growth last
month, underpinned by a record expansion in manufacturing, PMI
data showed. "Optimism is growing in Europe that the pace of its Covid
vaccination programme will be faster than thought previously,
which has seen the EUR/USD claw back a chunk of the ground lost
since last March," said Stuart Cole, chief macro strategist at
Equiti Capital.
The Australian dollar fell against the dollar, down 0.5% at
0.7627 AUD=D3 , while the New Zealand dollar was down 0.3%
NZD=D3 , both pausing their upward trajectory of the last two
weeks.
The Canadian dollar also fell, hurt by a third wave of the
COVID-19 pandemic in the country. Elsewhere, finance officials from the Group of 20 major
economies are poised to back a $650 billion boost in the IMF's
emergency reserves and extend a freeze on debt payments as part
of an effort to help developing countries still struggling to
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World FX rates https://tmsnrt.rs/2RBWI5E
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