FOREX-Dollar steadies; Aussie dollar nears two-week highs

* Currency markets quiet, holidays in China and Japan
* Dollar index down less than 0.1%
* Australian dollar close to two week highs
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(Updates prices, adds commentary and detail)
By Elizabeth Howcroft
LONDON, Feb 11 (Reuters) - The dollar slipped slightly on
Thursday, after softer-than-expected U.S. inflation data for
January and a reiteration of the Federal Reserve's dovish policy
stance, but currency market moves were generally quiet due to
holidays in Asian markets.
Currency market moves were small overnight because of
holidays in Japan and China, but the dollar fell close to
two-week lows against a basket of currencies, before recovering
somewhat 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.
"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 1200 GMT, the dollar was a touch lower on the day at
90.391 =USD .
The euro was up around 0.1% against the dollar, at $1.2128
EUR=EBS . A European Commission forecast that the euro zone
economy will rebound less than expected in 2021 did not impact
the currency. Powell's comments are keeping the dollar "somewhat on the
defensive but without any real definitive reasons to break out
of ranges," said Jeremy Stretch, head of G10 FX strategy at CIBC
Capital Markets.
"It's been a pretty volatile first six weeks of the year and
I think markets will perhaps just take a little bit of stock for
the next four or five days whilst Asian liquidity is limited and
the North American holidays play out," he said.
The Australian dollar -- which is seen as a liquid proxy for
risk appetite -- was up 0.3% at 0.7746 versus the dollar, close
to exceeding the previous session's two-week highs of 0.7756
AUD=D3 .
The British pound slipped slightly to $1.3826 at 1203 GMT,
holding 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 10.262 at 1203 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 $46,577 at 1204 GMT
BTC=BTSP . The cryptocurrency, which is sometimes viewed as a
hedge against inflation, has fallen around 3% since Tuesday's
record high. Ethereum also dropped from recent record highs
ETH= .

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