* Yen looks to politics as Suga set to succeed Abe
* Dollar under pressure ahead of Fed policy announcement on
Wed
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
(Updates throughout, changes byline, dateline)
By Sujata Rao
LONDON, Sept 14 (Reuters) - The dollar retreated on Monday
against major peers as a wave of M&A deals lifted the mood on
global equity markets and investors looked ahead to an
event-packed week which includes a Fed meeting and the
appointment of a new Japanese premier.
Attention focused on the pound as the UK parliament prepared
to debate a draft bill which the government admits breaches the
terms of its EU divorce treat. The currency firmed 0.4% versus
the dollar after suffering its worst week since March GBP=D3 .
The gain was partly down to the dollar index which slipped
0.2%, after firming for two weeks straight =USD .
This week's U.S. Federal Reserve meeting will be its first
since Chairman Jerome Powell unveiled a policy shift towards
greater inflation tolerance, effectively pledging to keep rates
low for longer.
"There will be pressure on the Fed to back up the new policy
goals with some action," said MUFG strategist Lee Hardman,
noting inflation remained well below target.
"Expectations are they could strengthen forward guidance,
possibly by saying rates will be on hold for 3-4 years," said
Hardman, who remains bearish on the greenback.
Speculators trimmed net short dollar positions for the
second straight week to $32.67 billion, according to Reuters
calculations and Commodity Futures Trading Commission data.
That's off nine-year highs of $33.68 billion in late August
at Standard Chartered said there was a risk the Fed
would disappoint dollar bears.
"Having set aside yield curve control as a near-term policy
option, the FOMC does not seem to have an operational consensus
on how to use the balance sheet," they told clients. "This may
disappoint investors."
The data showed net euro longs inched higher but remained
off record highs touched a few weeks ago.
The single currency had spiked to a one-week high above
$1.191 after Thursday's European Central Bank meeting before
easing back as policymakers talked it down the next day.
It was up around $1.186 on Monday EUR=EBS .
The yen meanwhile rose 0.13% to around 105.9 yen JPY=D3 to
the dollar, a five-day high. The Bank of Japan's meeting on
Thursday is not expected to yield any policy changes but it may
be quizzed on whether it could follow the Fed's inflation
stance.
The Reuters Tankan survey on Monday found Japanese
manufacturers pessimistic for the 14th straight month in
September, underlining the challenge the country's next leader
faces after the economy sunk into its deepest recession ever.
Chief Cabinet Secretary Yoshihide Suga is poised to become
head of Japan's ruling party on Monday and prime minister on
Wednesday, succeeding Shinzo Abe. Because Suga has vowed to
continue Abe's policies, radical changes are considered
unlikely. "The focus is on the line-up of his cabinet as well as
whether he will call a snap election," said Minori Uchida, chief
FX strategist at MUFG Bank. "He is saying he will continue and
advance Abenomics but it is questionable how much advancement he
can make."
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U.S. Dollar Index & CFTC speculative currency positions https://tmsnrt.rs/2Q64Zj7
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