Dollar falls ahead of key US data, Bitcoin rises

US dollar bills are shown in this illustration taken on July 17, 2022. REUTERS/Dado Ruvic/Illustration/File photo Get license rights

TOKYO (Reuters) – The dollar fell against a basket of currencies on Tuesday, reflecting lower Treasury yields as investors awaited key U.S. economic data ahead of the Federal Reserve’s monetary policy meeting next week.

The dollar index sat in the latest trading around 105.57, after losing more than 0.5% in the previous session with the decline in US Treasury bond yields.

The dollar found support last week after Federal Reserve Chairman Jerome Powell said US economic strength may warrant tighter financial conditions, pushing the benchmark 10-year yield above 5% to its highest level since July 2007.

Bitcoin returned the market spotlight as the virtual currency rose amid speculation that the United States may soon approve a bitcoin exchange-traded fund.

Market attention now turns to some of the final bits of US economic data ahead of the Fed’s October 31-November 1 meeting, with the flash Purchasing Managers’ Index (PMI) due later on Tuesday and GDP due on Thursday.

Matt Simpson, chief market analyst at City Index, said the PMI data could determine market expectations ahead of the GDP report.

“If the data leans far enough in one direction it could lead to a strong dollar rally or a collapse with the Fed in a blackout period,” he said, referring to the period leading up to a policy meeting when restrictions are imposed on public communications from central bank officials. .

The Federal Reserve is expected to hold interest rates at its meeting next week.

The European Central Bank is also expected to leave interest rates unchanged at its meeting on Thursday, after raising key interest rates by 25 basis points in September.

The euro was mostly steady at $1.0665, maintaining its gains against the dollar on Monday.

Meanwhile, a falling dollar gave the battered yen some minor relief. The Japanese currency reached the sensitive 150 level on Friday and Monday and last stabilized against the dollar at 149.77.

Traders see the 150-point threshold as a potential line for Japanese authorities to intervene in the currency market.

However, data out of the US this week could push the yen back into the danger zone if it turns strong.

“The yen will be particularly sensitive to hot US data, especially if it causes Treasuries to break through what looks like a key resistance level of 5% or so,” said Kyle Rodda, senior financial market analyst at Capital.com.

In cryptocurrency markets, Bitcoin jumped as much as 14% to a two-and-a-half-year high of $34,283.

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