Dollar falls amid cooling expectations of QE reduction; cryptocurrencies fall due to Biden’s initiatives

Schedule dollar index at intervals of 60 minutes

The dollar found itself in a tight trading range on Friday near multi-week lows against its major peers as traders ponder the next moves by major central banks ahead of next week’s Federal Reserve meeting.

Cryptocurrency Ethereum fell more than 10%, while larger rival Bitcoin fell 5% amid rumors that US President Joe Biden’s plan to raise capital gains taxes will limit investment in digital assets.

The euro suffered losses after European Central Bank President Christine Lagarde quieted expectations that policymakers would consider cutting bond purchases as the economic outlook improved.

Fed Chairman Jerome Powell is likely to reiterate Lagarde’s message that it is premature to talk about a gradual reduction in quantitative easing, which will put pressure on Treasury yields and limit the dollar’s growth against most currencies.

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“Powell must confirm continued soft monetary policy, as did Lagarde,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“As a result, the dollar is likely to fall against the yen, but the overall trend for the dollar is still ambiguous. The dollar could still rise against commodity currencies if commodity prices start falling again. ”

On Friday, the dollar fell to 107.80 yen, the lowest level since March 4.

The euro traded at $ 1.2027 after falling 0.2% on Thursday. It was still close to the seven-week high of $ 1.2080 set earlier this week.

The Aussie and New Zealand dollars strengthened Friday, but traders said the risks point to a decline due to the recent decline in commodity prices.

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The British pound was quoted at $ 1.38535 after falling 0.6% in the previous session.

The next Fed meeting will close on April 28, and while no major policy changes are expected, investors are paying close attention to any comments on the possibility of monetary policy normalization in the future.

Analysts say the rise in coronavirus vaccination rates and an improved economic outlook are reasons for optimism, but investors are lowering expectations of monetary policy normalization after Lagarde said that talk of ending emergency bond purchases was premature.

Manufacturing and services data for both the US and Germany will be released later on Friday, which may support positive economic sentiment, but the dollar and euro are unlikely to change much as investors wait and see before the Fed meeting, analysts said.

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In cryptocurrencies, Ether was roughly 7% below its opening point, at about $ 2,234, and previously dropped to $ 2,116, retreating from an all-time high of $ 2,645.97 set Thursday after President Biden unveiled a plan to nearly double taxes on capital gains for people earning over $ 1 million.

Bitcoin fell 4.2% to less than $ 50,000 and briefly touched $ 48,338. It has fallen every day except two since hitting a record $ 64,895.22 on April 14.

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