FOREX-U.S. dollar perks up after ECB policy talk cools euro

By David Henry

NEW YORK, April 22 (Reuters) - The U.S. dollar rose against major currencies on Thursday as a shot of positive economic news contrasted with comments from the European Central Bank that euro zone weakness still requires the support of its current pace of bond purchases.

The move was reinforced late in the day by a risk-off, dollar bid when news broke that U.S. President Joe Biden will propose nearly doubling taxes on capital gains for people earning more than $1 million.

The dollar index =USD against major currencies was up 0.2% to 91,303 in the late afternoon in New York after markets sifted through the ECB remarks and news that U.S. new unemployment claims had fallen to a 13-month low, setting the stage for blockbuster jobs growth in April.

The euro EUR=EBS had been up about 0.1% against the dollar before the events, but later fell 0.2% on the day to $1.201.

ECB chief Christine Lagarde said policy makers had not discussed any phasing out the bond-buying program "because it premature." She said the economy is still "clouded with uncertainty" despite signs of improvement and progress with vaccinations.

Euro zone bond yields dipped after Lagarde spoke.

"Until you see better COVID numbers out of Europe, the euro's upside potential is going to be limited," said Ronald Simpson, managing director, global currency analyst at Action Economics in Safety Harbor, Florida.

Simpson added that if Biden's tax proposal goes forward it could hurt the greenback if it spurs stock investors with big gains to sell before it takes effect.

"That might keep pressure on the stock market, on and off, for the rest of the year, which would not bode well for the dollar if we start seeing outflows from U.S. equities," Simpson said.

The immediate impact was "not too serious," said Erik Bregar, head of FX strategy at Exchange Bank of Canada.

"We're seeing an extension of this morning's move post-ECB," Bregar said. "It is a classic risk-off, U.S. dollar bid."

The currency markets initially vacillated over what Lagarde revealed about the timing of interest rate hikes.

Alex Merk, chief investment officer at Merk Investments in Palo Alto, California, said the market heard that the ECB would like to pace its rate moves with those of the U.S. central bank but also that the two economies have different inflation trajectories.

In the end, Merk said, "there was no big substance there."

The back-and-forth of the currencies on Thursday morning was another example of how markets have been preoccupied with sorting out how quickly different economies will rebound from the pandemic and how their interest rates will fluctuate.

On Wednesday the Canadian dollar rose sharply after the Bank of Canada signaled rate hikes next year and said it was pulling back on asset purchases. The announcement marked the first Group of Seven central bank to move towards withdrawing stimulus.

Now markets are looking toward next week's meeting of the U.S. Federal Reserve and possible comments about how it views future changes in its easy monetary policy.

Yields on were little changed on the day at 1.55% despite rising about four basis points at one point.

Sentiment toward the dollar has weakened much of this month after a March spike in Treasury yields reversed course. But some analysts say the outlook over the longer term remains positive due to a strong U.S. economy and more coronavirus vaccinations.

Merk said, "Ultimately what matters is the progress with the pandemic" and what that means for a global recovery, inflation and interest rates.

In cryptocurrency markets, ethereum ETC=BTSP jumped as much as 10% during the day. Bitcoin BTC=BTSP slipped about 2% to $52,800.

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Currency bid prices at 3:31PM (1931 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Dollar index

=USD

91.3030

91.1100

+0.22%

1.469%

+91.4250

+90.9980

Euro/Dollar

EUR=EBS

$1.2010

$1.2036

-0.20%

-1.69%

+$1.2070

+$1.1994

Dollar/Yen

JPY=EBS

108.0350

108.0400

+0.00%

+4.56%

+108.2300

+107.8150

Euro/Yen

EURJPY=

129.74

130.03

-0.22%

+2.22%

+130.4600

+129.6800

Dollar/Swiss

CHF=EBS

0.9178

0.9172

+0.08%

+3.75%

+0.9191

+0.9145

Sterling/Dollar

GBP=D3

$1.3839

$1.3927

-0.64%

+1.29%

+$1.3948

+$1.3825

Dollar/Canadian

CAD=D3

1.2501

1.2495

+0.06%

-1.81%

+1.2534

+1.2473

Aussie/Dollar

AUD=D3

$0.7707

$0.7753

-0.62%

+0.16%

+$0.7764

+$0.7692

Euro/Swiss

EURCHF=

1.1021

1.1033

-0.11%

+1.98%

+1.1047

+1.1015

Euro/Sterling

EURGBP=

0.8677

0.8641

+0.42%

-2.91%

+0.8702

+0.8635

NZ Dollar/Dollar

NZD=D3

$0.7160

$0.7209

-0.69%

-0.31%

+$0.7213

+$0.7148

Dollar/Norway

NOK=D3

8.3720

8.3410

+0.51%

-2.37%

+8.3910

+8.3130

Euro/Norway

EURNOK=

10.0577

10.0368

+0.21%

-3.91%

+10.0729

+10.0127

Dollar/Sweden

SEK=

8.4326

8.4015

+0.10%

+2.88%

+8.4506

+8.3861

Euro/Sweden

EURSEK=

10.1283

10.1180

+0.10%

+0.52%

+10.1387

+10.1040

World FX rateshttps://tmsnrt.rs/2RBWI5E

ECB PEPPhttps://tmsnrt.rs/2QPN8QZ

(Reporting by David Henry in New York and Ritvik Carvalho in London; additional reporting by Stanley White in Tokyo; editing by Larry King, William Maclean and Andrew Heavens)

((David.Henry@thomsonreuters.com; +1-332-219-1974; Reuters Messaging: david.henry.thomsonreuters.com@reuters.net))

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