The dollar rebounds as the gold bulls take a breather By Reuters

By Tom Westbrook

SINGAPORE (Reuters) – The dollar rebounded from a two-year low on Tuesday as selling pressure eased ahead of a Federal Reserve meeting and political disputes over the upcoming U.S. tax bailout package approached a conclusion.

The global reserve currency has been falling since May and has been dumped in recent days as cracks in the recovery of the US coronavirus and crumbling returns sent investors elsewhere.

Buyers abandoned carpentry after a pullback in the price of gold in the middle of the Asian session, lending the back of the dollar and pushing other large companies to peak milestones.

The New Zealand Dollar it hit an eight-month high of $ 0.6702 and then fell to $ 0.6656, while the British pound he retired from a maximum of four months to sit at $ 1.2850.

The Japanese yen It weakened 0.3% to stand just below its strongest level since mid-March at 105.65, and the euro () was the last 0.2% softer at $ 1.1725. The dollar gave up early gains that fall 0.2 to $ 0.7133. [AUD/]

Most analysts say the reasons for the dollar’s big dip, especially the fall in real yields, remain intact, but that the pace of the drop probably warranted a pause, particularly with a Fed meeting and a package of US expenses

“Maybe it is a case that the market is getting ahead,” said Moh Siong Sim, currency analyst at the Bank of Singapore.

On the horizon is a Fed meeting that begins later Tuesday and Friday’s deadline for the US Congress to extend unemployment benefits, both unpredictable enough to inject some nerves into betting against the dollar. .

Against a basket of coins () (), the dollar rose from a two-year low from 93,492 to 93,918. Still, it fell 3.6% in July and will need a stronger rebound to avoid posting its worst month in nearly a decade.

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No policy change is anticipated at the Fed meeting on Wednesday, but investors are hoping to hear their super-easy outlook reaffirm and speculate about a change in emphasis on future guidance.

A change could be the average inflation target, which would see the Fed aiming to push inflation above its 2% target to offset years of underinjection.

That prospect has put pressure on real U.S. returns, sending the 10-year paper yield protected against inflation. to a record low -0.92% last week, where it has remained.

But a rise in nominal yields, which takes 10-year () Monday to a high of 0.63% for the week, suggests that investors could “sell the fact” even if the Fed sounds subdued.

“The (Fed) announcement may be a wet squib or even lead to a modest fixed-income sale for profit,” said Steve Englander, head of global research for FX G10 at Standard Chartered (OTC 🙂 in New York.

A large United States tax package, currently stalled in negotiations between Democrats, who have made a $ 3 trillion proposal, and Republicans who have put forth a more modest $ 1 trillion plan, could also boost the dollar if approved. .

The current Republican plan would cut an expanded unemployment benefit from $ 600 a week to $ 200 at a time when some 30 million Americans are out of work.

US consumer confidence and manufacturing data at 1400 GMT will also give markets the latest read on progress in the US economic recovery.

On the virus front, infection rates in the US may stabilize, with a 2% drop in the number of new cases last week, but the economic impact of restrictions to restrict its spread and loss of Jobs are just beginning to be felt.