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FOREX-U.S. dollar skids to two-week low vs yen as Fed looms
Published at 15/09/2020 at 20:06

* Fed seen sticking to dovish stance

* Dollar/yen breaching 105.20 support could see further selling

* China's yuan surges to 16-month high on economic data

* Australian, New Zealand dollars gain

* Graphic: World FX rates in 2020

(Adds new comments, updates prices)

By Gertrude Chavez-Dreyfuss and Sinéad Carew

NEW YORK, Sept 15 (Reuters) - The dollar dropped to a two-week low against the yen on Tuesday on expectations the Federal Reserve will maintain its downbeat stance on the U.S. economy as it grapples with the COVID-19 pandemic, and keep U.S. interest rates near zero for some time.

The Fed begins a two-day meeting on Tuesday and analysts expect the U.S. central bank to affirm its current zero-interest-rate policy over the next three years, a view that could further weigh on the dollar.

Analysts do not expect a rate hike view from the Fed on Wednesday, but if it does happen, that could be a positive for the dollar.

"The big story for tomorrow would be a 2023 rate hike on the dots," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.

"What we'd hope to see is that the Fed projects no rate hikes for 2023. If they put a rate hike in there, equities and commodities would sell off and the dollar would rally," he added.

In afternoon trading, the dollar fell 0.3% against the yen

to 105.46, after earlier sliding to a two-week low of 105.30 yen.

A break below 105.20 yen could pave the way for further technical selling, analysts said.

"The U.S. central bank will be wary of uncertainty the U.S. presidential election will bring with it and wouldn't want to cause unnecessary turmoil in the financial markets," said Fawad Razaqzada, market analyst, at ThinkMarkets.com in London.

The dollar index was little changed at 93.062 , as the greenback recovered somewhat after the euro reversed earlier gains.

The euro was last down 0.1% at $1.1851 .

Earlier, the euro gained after the ZEW economic sentiment survey showed investor sentiment in Germany rose in September, despite headwinds from Brexit and rising coronavirus infections.

The euro along with commodity-linked currencies such the Australian and New Zealand dollars gained after positive Chinese data overnight.

China's industrial output accelerated and retail sales grew for the first time this year, beating analysts' forecasts.

That pushed the Chinese yuan to its highest since May 2019 against the dollar , which was last down 0.4% at 6.779 yuan in the offshore market.

U.S. equities also rallied, as risk appetite gained ground.

"What's driving both equities and the dollar is a combination of ample liquidity provision by the Fed and part of it is rising optimism for a vaccine and the global recovery," said BMO's Anderson.

"That global recovery is likely to be led elsewhere. Europe is ahead in the COVID curve and China is way ahead in the COVID curve."

========================================================

Currency bid prices at 2:55PM (1855 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar EUR= $1.1851 $1.1868 -0.14% +5.72% +1.1899 +1.1840

Dollar/Yen JPY= 105.4600 105.7200 -0.25% -3.12% +105.8100 +105.3100

Euro/Yen EURJPY= 124.98 125.42 -0.35% +2.48% +125.7600 +124.7600

Dollar/Swiss CHF= 0.9079 0.9083 -0.04% -6.19% +0.9088 +0.9052

Sterling/Dollar GBP= 1.2894 1.2844 +0.39% -2.75% +1.2925 +1.2816

Dollar/Canadian CAD= 1.3183 1.3174 +0.07% +1.52% +1.3202 +1.3134

Australian/Doll AUD= 0.7305 0.7288 +0.23% +4.05% +0.7342 +0.7268

ar

Euro/Swiss EURCHF= 1.0761 1.0774 -0.12% -0.84% +1.0787 +1.0754

Euro/Sterling EURGBP= 0.9190 0.9236 -0.50% +8.69% +0.9259 +0.9185

NZ NZD= 0.6714 0.6698 +0.24% -0.33% +0.6736 +0.6685

Dollar/Dollar

Dollar/Norway NOK= 9.0249 9.0344 -0.11% +2.81% +9.0527 +8.9902

Euro/Norway EURNOK= 10.6960 10.7250 -0.27% +8.72% +10.7458 +10.6870

Dollar/Sweden SEK= 8.7869 8.7614 +0.09% -6.01% +8.7981 +8.7415

Euro/Sweden EURSEK= 10.4136 10.4041 +0.09% -0.53% +10.4273 +10.3910

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Chinese data bounce

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(Reporting by Gertrude Chavez-Dreyfuss and Sinead Carew; Editing by Andrea Ricci and Tom Brown)

((gertrude.chavez@thomsonreuters.com; 646-301-4124; Reuters Messaging: rm://gertrude.chavez.reuters.com@reuters.net))