* EUR lower and DXY higher as cautious mood dominates in
Asia
* AUD and NZD soft; Fed and stimulus progress eyed
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Jan 26 (Reuters) - The U.S. dollar rose 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.
U.S. Treasuries held onto gains, equity markets fell in
Asia, and the cautious move into safer assets pushed the dollar
index =USD higher. The greenback rose 0.1% to 90.462, close to
a one-week high and near the middle of a range it has held for
most of the month. MKTS/GLOB
The euro EUR=EBS , which fell on Monday as German business
morale slumped, is also trading in a range between support
around $1.2050 and resistance at $1.2215. It slipped 0.1% to
$1.2128.
The yen JPY=EBS was steady at 103.71 per dollar. The
risk-sensitive Australian dollar hit a one-week low and the New
Zealand dollar fell 0.4%.
"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, adding that this had left the kiwi
in a mode of "indecision" 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
at $0.7174 and the Australian dollar AUD=D3 was down 0.4% at
$0.7685. Sterling GBP= slipped 0.2% to $1.3645.
Tight liquidity supported 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 6.4733.
CNY/
BIDEN TIME
Investors last week added to bets that the dollar's
months-long downtrend would extend, weighed by U.S. budget and
trade deficits. Short dollar positions 0#NETUSDFX= have hit
their highest in almost ten years, according to data last week.
But 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,
the global death toll has surpassed 2 million, and vaccine
roll-outs are running into delays and production hitches.
Drugmaker Moderna, however, said on Monday it believes its
vaccine works against new variants. Investors are bracing for soft U.S. growth figures later in
the week and expect that the Federal Reserve, which meets for
two days starting on Wednesday, will indicate it will continue
to provide support to the world's largest economy.
"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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