March 21, 2014 / 5:30 AM / in 4 years

FOREX-Dollar pauses before Fed speakers; yuan hits 13-month low

* Dollar index off three-week peak but still well supported

* Markets seek more policy clarity from string of Fed speakers

* Chinese yuan hits 13-month low

* Japanese markets shut for holiday (Updates prices, adds comments)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, March 21 (Reuters) - The dollar hovered near a three-week peak against a basket of major currencies on Friday, but could struggle to extend gains as investors awaited more clarity on the Federal Reserve’s policy path.

Fed officials including Richard Fisher, James Bullard and Narayana Kocherlakota are all due to speak later on Friday, after Fed Chair Janet Yellen surprised markets mid-week by suggesting the possibility of raising interest rates early next year.

U.S. yields have all moved higher as markets brought forward the risk of a Fed rate hike by April.

Still, market participants seem to have differing views on the real intentions behind Yellen’s comments, said Teppei Ino, Singapore-based analyst for Bank of Tokyo-Mitsubishi UFJ.

“One person might say it was a slip of the tongue, while another may say that the comments were made very much on purpose,” Ino said.

The dollar index last traded at 80.188, not far from a high of 80.354 set on Thursday, a level not seen since late February.

“A heavy Fed speaker calendar Friday will be carefully parsed for any effort to roll back this week’s shift forward in tightening expectations,” analysts at BNP Paribas wrote in a note to clients.

However, they noted that most of the Fed speakers are generally on the hawkish end of the spectrum.

“In any event, we would expect the Fed to struggle to fully reverse the move in rates...unless data begins to significantly disappoint expectations once again.”

U.S. data on Thursday was mixed but a rebound in factory activity in the Mid-Atlantic region held out hope the economy might be regaining strength after being hobbled by severe weather.

The dollar showed little reaction after Fitch Ratings affirmed the United States’ credit ratings at “AAA” with a stable outlook, removing the country from negative watch.

The euro held steady at $1.3780, having plumbed a two-week low of $1.3749 on Thursday. The euro was on track to post a roughly 1 percent drop this week.

“Euro seems to have formed a pretty good top, $1.3850 area, so I‘m thinking to sell into any headline-induced spikes,” said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore, referring to the euro’s near-term outlook.

Not helping the common currency, European Central Bank Executive Board member Sabine Lautenschlaeger said on Thursday rates will remain low or go even lower for an extended period.


The Chinese yuan hit a 13-month low after the central bank lowered the mid-point of its permitted trading range, which is seen as a signal of official comfort with the currency’s recent losses.

The yuan has tumbled more than 1.2 percent so far this week after the central bank last weekend doubled the currency’s permitted trading range to 2 percent either side of the fixing.

Even if it stabilises on Friday, the fall would be the biggest weekly loss for the yuan, based on Thomson Reuters data going back to 1992.

Markets, already fretting about slower growth in the world’s second-biggest economy, fear the sharp drop in the yuan could add more pressure on Chinese companies saddled with foreign currency debt and expose holders of offshore yuan derivatives to heavy losses.

Elsewhere, the dollar struggled to make further gains on the Japanese yen after topping out at 102.69 on Wednesday. The dollar last stood at 102.39 yen, staying in a narrow range in Asia with Japanese markets shut for a holiday.

The greenback also lost steam against the Canadian and Australian dollars. It last traded at C$1.1247 after reaching a 4-1/2 year high of C$1.1279 on Thursday, while the Aussie edged up 0.2 percent to $0.9058. (Editing by Kim Coghill)

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