FOREX-Dollar steadies after soft U.S. inflation, dovish Fed

* Dollar index down less than 0.1%
* Australian dollar close to two week highs
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

LONDON, Feb 11 (Reuters) - The dollar fell during a quiet
Asian session on Thursday, after softer-than-expected U.S.
inflation data for January and a reiteration of the Federal
Reserve's dovish policy stance, but recovered some losses as
European markets opened.
U.S. core inflation last month was zero, data showed on
Wednesday, against market expectations of 0.2%.
Federal Reserve Chair Jerome Powell said that while he
expected base effects and pent-up demand when the economy fully
reopens to boost inflation, that was likely to be transitory,
citing three decades of lower and stable prices. Powell also reiterated that the central bank's new policy
framework could accommodate annual inflation above 2% for some
time before raising rates, reinforcing market expectations of
weak returns from the dollar. Currency market moves were small overnight because of the
Lunar New Year holidays in Japan and China, but the dollar fell
close to two-week lows against a basket of currencies.
At 0805 GMT, it was lower on the day at 90.411, having
recovered some overnight losses as European markets opened
=USD .
"Any shift in the policy stance (to a hawkish, less
accommodative side) is not imminent, US front end rates are to
remain anchored, the US curve is set to steepen further and real
rates are to remain deeply negative," ING FX strategists wrote
in a note to clients.
"As the global economy starts its post winter recovery in
Q2, this suggests more upside to cyclical currencies, while
negative US real rates should also offer helping hands to the
low yielding ones, such as EUR vs the dollar," they said.
At 0806 GMT, the euro was little changed against the dollar,
at $1.2121 EUR=EBS .
The Australian dollar -- which is seen as a liquid proxy for
risk appetite -- was up 0.3% at 0.7743 versus the dollar, having
come close to a two-week high overnight AUD=D3 .
The British pound was little changed at $1.3825, a below the
three-year high of $1.3865 reached on Wednesday GBP=D3 .
Oil prices fell, giving up some recent gains after Brent
crude strengthened for 9 sessions in a row. The commodity-linked
Norwegian crown eased off from Wednesday's one-year high against
the euro and the pair changed hands at 10.261 at 0817 GMT
EURNOK=D3 .
Elsewhere, U.S. President Joe Biden and his Chinese
counterpart Xi Jinping spoke for the first time since the U.S.
election. Biden said a free and open Indo-Pacific was a priority
and raised concerns about China's actions in Hong Kong, Xinjiang
and Taiwan. "President Biden seems to lay a ground of his China approach
which might be somewhat different from Trump in a few aspects,
but the bottom line is US sees China as a `strategic
competitor'," Commerzbank senior economist Hao Zhou wrote in a
note to clients.
With China's markets closed, the yuan showed little reaction
to the phone call.
Bitcoin was trading at around $44,682 at 0825 GMT
BTC=BTSP . The cryptocurrency, which is sometimes viewed as a
hedge against inflation, has fallen around 7% since Tuesday's
record high. Ethereum also dropped from recent record highs
ETH= .

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