* EUR and DXY steady as cautious mood dominates in Asia
* AUD and NZD slightly softer; Fed and stimulus progress
eyed
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Jan 26 (Reuters) - The U.S. dollar steadied on
Tuesday as rising coronavirus cases and doubts over the speed
and size of U.S. stimulus tempered traders' upbeat mood, while
investors were also cautious ahead of the Federal Reserve's
policy review later in the week.
Bonds held gains though hard-running equity markets cooled
in Asia, and the cautious move into safer assets held the dollar
index =USD at 90.353, roughly in the middle of a range it has
kept for the past two weeks. MKTS/GLOB
The euro and yen were likewise hemmed in, with the euro
unable to break resistance around $1.2190 while the continent
grapples with new COVID-19 infections and fresh lockdowns.
The common currency EUR=EBS took a knock on Monday from
slumping German business morale, and nursed those small losses
to trade around $1.2142 in the Asia session. The yen JPY=EBS was steady at 103.71 per dollar, while the
risk-sensitive Australian and New Zealand dollars softened
slightly.
"Markets have come a long way on the hope that COVID goes
away and governments spend a lot of money," said Westpac
currency analyst Imre Speizer.
"Both of those have stalled at the moment, and so markets
will stall as well," he said, leaving the kiwi, for example, in
"indecision mode" between $0.7150 and $0.7240.
"One of those needs to break to give you direction for the
next couple of weeks," Speizer said. The kiwi NZD=D3 was last
down 0.1% at $0.7190 and the Australian dollar AUD=D3 down
0.2% at $0.7699. Sterling GBP= slipped 0.1% to $1.3662.
Tight liquidity lifted the Chinese yuan. One-year onshore
yuan forwards CNY1Y=CFXS rose to their highest levels of 2021,
while the onshore spot price CNY= edged up 0.1% to 6.4713.
CNY/
BIDEN TIME
Investors last week added to bets that the dollar is going
to get weaker, dragged down by budget and trade deficits, and
short dollar positions have hit an almost ten-year high.
0#NETUSDFX=
However currency markets have entered a holding pattern
while waiting to see whether the Democrats' big virus relief
package can clear Congress and whether COVID-19 vaccines
actually start turning the tide on the pandemic.
U.S. Senate Majority Leader Chuck Schumer said Democrats may
try and pass much of President Joe Biden's $1.9 trillion
spending package with a majority vote, but it is not clear if
they have the numbers to override Republican objections.
Global coronavirus cases are creeping towards 100 million,
deaths are over 2 million and vaccine rollouts are running in to
delays and production hitches. Drugmaker Moderna, however, said
on Monday it believes its vaccine works against new variants.
Economic data outside Asia has also been soggy.
That has investors bracing for soft U.S. growth figures due
later in the week and are hoping to hear that the Federal
Reserve, which meets for two days starting on Wednesday, remains
supportive.
"We expect the Fed to reiterate a dovish policy signal,"
said MUFG currency analyst Lee Hardman in a note to clients.
"The Fed is likely to re-emphasize that it is still too
early to talk about slowing the pace of quantitative easing ...
despite the increased likelihood of bigger fiscal stimulus."
In cryptocurrency markets, a Monday rally in bitcoin
BTC=BTSP had mostly unwound and it traded down 1% at $31,744.
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