FOREX-Dollar gains as investors reduce short bets

* Dollar index moves between gains and losses year to date

* Dollar rises to 2-week high vs yen, 1-wk high vs euro

* Fed eyes gradual bond buys; several hundred bln dlrs-WSJ
(Updates prices, adds comment, changes dateline, previous

NEW YORK, Oct 27 (BestGrowthStock) – The dollar rose against the
euro and yen on Wednesday, leaving the dollar index (Read more about the global trade. ) little
changed year to date, as investors eased short bets against the
currency ahead of a Federal Reserve meeting.

While Fed meetings are always of paramount interest, the
coming statement is more anticipated than usual given the
central banks has telegraphed several times that it will add to
the liquidity in the system to stoke economic growth through
additional quantitative easing.

The only questions now are by how much and whether the new
measures will be implemented over time or phased in.

With expectations that QE will be implemented in steps,
some investors are more willing to take bets on the dollar if
it gains traction, the QE will bolster the economic outlook
compared with other regions such as the euro zone.

And The Wall Street Journal reported the Fed would make
bond purchases worth a few hundred billion dollars over several
months, which compared with investors’ base-case scenario for
an initial commitment to buy at least $500 billion.

The dollar hit a two-week high against the yen and a
one-week peak versus the euro, which was also knocked by euro
zone banks taking up more cheap funding than expected at a
three-month ECB tender [ID:nLDE69Q0XN].

The greenback jumped against the Australian dollar too and
hit a one-month high against the Swiss franc (CHF=: ).

“The dollar’s slide since September has been pricing in
aggressive price action by the Fed to around $1 trillion,” said
Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange. “Some stabilization, Fed official comments and the
Wall Street Journal article have resulted in investors paring
back those aggressive expectations. Given the price action we
can assume they are trimming those short dollar bets.”

In a Reuters survey earlier this month, U.S. primary
dealers’ projections for the size of the Fed’s expected
quantitative easing at its Nov. 2-3 policy meeting ranged from
$500 billion to $1.5 trillion. [FED/R]

In early New York trade, the euro was down 0.3 percent at
$1.3820 (EUR=: ). It earlier fell as low as $1.3770 on electronic
trading platform EBS (EUR=EBS: ) as a break of an option barrier
at $1.3800 accelerated selling.

The dollar trimmed gains versus the euro on Wednesday after
data showing U.S. durable goods orders rose more than expected
in September, though they fell when transportation equipment
was excluded. For details see [ID:nN27154819].

Traders reported central banks and other major players
looking to buy the euro on dips below $1.38. Bids were expected
around $1.3750/60. A break of $1.3750 could prompt a test of
last week’s low around $1.3695.

Many analysts believe the gap between euro zone and U.S.
short-term rates, reflecting QE expectations from the Fed while
the ECB gradually withdraws liquidity, will mean the euro is
unlikely to fall below $1.35 in the next month or two
particularly while investors wait to see the impact of the Fed
PDF on G20’s uneasy truce:
FX column on the Fed: [ID:nLDE69L1EY]


The dollar index (Read more about the global trade. ), which tracks the performance of the
greenback versus a basket of six other major currencies, was up
0.2 percent at 77.864(.DXY: ) and is moving back and forth
between marginal gains and losses for the year to date.

Against the yen, the dollar rose as high as 81.99 yen on
electronic trading platform EBS (JPY=EBS: ), pulling further away
from a 15-year low of 80.41 yen struck earlier this week. It
last traded at 81.60 yen.

Traders said a fair amount of overnight 82.00 yen strikes
were bought on Tuesday, suggesting that area could act as
resistance going into Wednesday’s 10 a.m. (1400 GMT) cut —
when many trades expire. Option-related stops were then
highlighted at 82.15 yen.

The Aussie dollar was down 1.3 percent at $0.9720 (AUD=D4: ),
dented by a smaller-than-expected rise in Australian consumer
prices last quarter which was seen as reducing the chances of
future interest rate hikes.

Spot yuan (CNY=CFXS: ) closed down against the dollar on
Wednesday after the People’s Bank of China set another weaker
mid-point in a move seen aimed at curbing mounting speculation
of further yuan appreciation. [ID:nTOE69Q08R].

(Additional reporting by Tamawa Desai)
(Reporting by Nick Olivari; Editing by Theodore d’Afflisio)

FOREX-Dollar gains as investors reduce short bets