FOREX-Dollar falls to 10-day low as rally pauses; riskier currencies rebound

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* Dollar rally halts, Aussie and Kiwi gain

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*Bitcoin hits five-month high

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* Graphic: World FX Rates tmsnrt.rs/2RBWI5E (Updated title with new record, adds details about dollar moves, updates prices, adds Swedish crown and Norwegian crown)

LONDON, Oct 14 (Businesshala) – The dollar fell against key peers on Thursday, hitting its lowest level in 10 days in a pullback from its recent rally, while the Australian and New Zealand dollars rose.

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Expectations that the US Federal Reserve will tighten monetary policy faster than previously expected have helped the dollar’s growth since early September.

But its climb has eased recently and on Thursday it was on track for its second biggest two-day drop so far this year, even minutes after the Fed’s September meeting. The tapering of incentives is also likely to start this year.

“This appears to be an excellent case of a rumor buy, sell fact type mentality,” said Neil Jones, head of FX sales at Mizuho.

“The Fed reaffirmed the expectations of many investors of, I would suggest, holding long dollar positions.”

“It’s just been a position to end the dollar long — taking advantage of the long dollar position because (the Fed tightening) is now somewhat involved in the price.”

At 0913 GMT, the dollar index was down 0.2% at 93.794, its lowest since October 4. On Tuesday, it had hit a one-year high of 94.563.

The euro was up 0.2% at $1.1619, a nine-day high.

A report from the Labor Department shows US consumer prices rose solid in September, and are likely to rise further amid a rise in energy prices, potentially at the Fed as soon as possible to normalize policy. There is pressure to work.

Minutes from the Fed’s September meeting also showed that a growing number of policymakers were concerned that high inflation could continue.

“My expectation is that this dollar weakness will not last long and we are back in a long-term bull trend,” said Jones of Mizuho.

Initial US jobless claims and PPI data are due later in the day.

“Today’s US PPI data should be a reminder that the Fed needs to be more cautious about inflation,” ING Strategists wrote in a note to clients.

Swedish inflation rose to its highest level since 2008 in September, prompting the Swedish crown to extend gains and hit its highest level in eight months against the euro.

At 0914 GMT, the euro was down 0.5% against the Swedish crown at 10.0175.

The Norwegian crown also strengthened, with the euro down 0.6% against the noki at 9.7828.

Simon Harvey, senior FX analyst at Monex Europe, said the Swedish crown’s jump was part of the day’s rebound in most riskier currencies, but inflation data contributed to the move.

The Australian dollar, which is seen as a liquid proxy for risk appetite, was up 0.5% against the dollar at $0.74175. The currency brushed up data showing a fall in the number of jobs, with investors betting on a quick recovery as lockdown measures are eased.

The New Zealand dollar also gained 0.8% to $0.70245, its highest in two and a half weeks.

The Swiss franc was up about 0.2% against the euro. Around 0600 GMT, it hit its highest level in 11 months against the euro, a move that Mizuho’s Jones said could be due to a combination of risk-hatred in global markets and more broad-based euro weakness.

Turkey’s lira narrowed losses, pulling back from a record low after President Tayyip Erdogan sacked three members of the central bank’s monetary policy committee.

Elsewhere, the cryptocurrency bitcoin was at around $57,622. Earlier in the session, it had hit a five-month high of $58,550.

Bank of England deputy governor John Cunliffe said on Wednesday that the cryptocurrency’s decline is a “plausible scenario” and that regulations are needed to regulate the fast-growing sector as “a matter of urgency.”

Reporting by Elizabeth Hawkroft; Editing by Amelia Sithole-Mataris and Kim Coghill

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