* 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 https://tmsnrt.rs/2RBWI5E
(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
JPY=EBS 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 =USD , as the
greenback recovered somewhat after the euro reversed earlier
gains.
The euro was last down 0.1% at $1.1851 EUR=EBS .
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 AUD=D3 and New Zealand dollars NZD=D3 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 CNH=EBS , which was last down 0.4% at 6.779
yuan in the offshore market.
U.S. equities also rallied, as risk appetite gained
ground. .N
"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
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Chinese data bounce https://tmsnrt.rs/35GhWZZ
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