The dollar falls before key US data and bitcoin soars

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The U.S. dollar bill is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo Acquire license rights

TOKYO, Oct 24 (Reuters) – The dollar weakened against a basket of currencies on Tuesday, reflecting a fall in Treasury yields as investors awaited key U.S. economic data ahead of the Reserve’s monetary policy meeting federal government next week.

The dollar index was last settled around 105.57, after losing more than 0.5% in the previous session as US Treasury yields fell.

The greenback found support last week after Fed Chairman Jerome Powell said The strength of the US economy could justify a tightening of financial conditions, which would have pushed the benchmark 10-year yield above 5%, to its highest level since July 2007.

Bitcoin has returned to the forefront with virtual currency soaring on speculation that the United States could soon approve a Bitcoin exchange-traded fund.

Market attention now turns to some of the latest U.S. economic data ahead of the Oct. 31-Nov. 1 Fed meeting, with the flash Purchasing Managers’ Index (PMI) released later Tuesday and gross domestic product expected Thursday.

The PMI data could set market expectations ahead of the GDP report, said Matt Simpson, senior market analyst at City Index.

“If the data goes far enough in one direction, it could cause a sharp rise in the dollar or a break with the Fed during a blackout,” he said, referring to the run-up to the policy meeting at the during which limits are placed on public communications by central bank officials. .

The Fed is expected to hold rates steady at its meeting next week.

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

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

At the same time, the dollar’s decline brought slight relief to the yen. The Japanese currency reached the sensitive level of 150 on Friday and Monday and was last stable against the greenback at 149.77.

Traders see the 150 threshold as a possible finish line for Japanese authorities wanting to intervene in the foreign exchange market.

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

“The yen will be particularly sensitive to hot U.S. data, especially if it pushes Treasuries past what looks like a key resistance level of around 5%,” said Kyle Rodda, senior financial markets analyst at .

In cryptocurrency markets, bitcoin surged 14% to a two-and-a-half-year high of $34,283.

Reporting by Brigid Riley. Editing by Sam Holmes

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