The dollar surrendered some of its recent gains after markets reconsidered a brief surge in rate-hike betting in the wake of Wednesday's U.S. CPI report nL1N2R914S, while Fed minutes largely confirmed expectations that it will begin tapering in the next two months.
Though Treasury yields briefly rose after the above-expectations headline CPI, dragging the dollar higher, the subsequent reversal and curve flattening suggested that markets had gone too far in pulling forward rate-hike projections nL1N2R91SS.
Fed meeting minutes added details to Fed tapering plans that are taking shape, with discussion of cutting purchases of Treasuries by $10 billion a month and those of mortgage-backed securities by $5 billion a month -- they fell largely within market expectations.
Asset purchase reductions starting after the Nov.
2-3 meeting and rate hikes in H2 2022 were largely factored in, while the dollar had become overbought and ripe for profit-taking before Wednesday's session.
Friday's U.S. September retail sales are the next major event risk and check on how the economy dealt with the Delta-driven pandemic peak last month, return to school and loss of some fiscal support, as food, energy and rent prices rose briskly.
The dollar still has the advantage over the euro and yen because the Fed appears more interested in and capable of tightening monetary policy than the ECB or BOJ, though the BOE is even more so.
EUR/USD was up 0.5% after holding above Tuesday's 2021 low of 1.1522 on EBS, just above important supports by 1.1500 nL1N2R91MV.
The rebound breached the daily tenkan at 1.1581, which it hasn't closed above since Sept.
7's 1.1842 close.
GBP/USD gained 0.36%, again finding buyers near the now rising 10-day moving average and looking for a close above the daily kijun, 50% Fibo of September's slide, the weekly tenkan and 55-week moving average, all at 1.3662.
Monday's 1.3674 high breached those hurdles before prices fell back.
The 21-day moving average at 1.3631 could well be closed above in a nod to a broader recovery from September's lows nL1N2R91J4
The market is pricing in 91bp of BOE rate hikes by next December, with 23bp this December, well ahead of Fed hike pricing.
USD/JPY fell 0.15% and had been due for a pullback amid overbought daily and weekly RSIs from the 4.2% surge since the Sept.
22 FOMC-day low nL1N2R91G9.
The BOJ's yield curve control policy has left the yen far more vulnerable to rising Treasury yields.
But with rapid Fed rate hike pricing starting to flatten the Treasury yield curve, further rate hike pricing the dollar thrives on may have to wait for more economic data that support that trend.
Adding to the dollar's setback was stronger-than-forecast Chinese trade data nL1N2R905O that helped send USD/CNH down 0.42% to its lowest since mid-September.
Bitcoin and ether posted modest gains, roughly in line with stocks.
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