Dollar closes below one-month high as investors focus on default

Dollar closes below one-month high as investors focus on default

TOKYO, Sept 22 Reuters - The dollar closed below a near one-month high on Wednesday as investors focused on two key risks - default by Chinese property developer Evergrande and expected pace of U.S. monetary policy tightening.

The dollar index stood at 93.226 in early Asian trade, not far from Monday's one-month high of 93.455.

The euro moved to $1.1725, having stabilised on Monday at a one-month low of $1.1700.

The Japanese currency dropped to a low of 127,93 as the safe-haven currency fell into the common mood.

The USD traded at 109.165 yen, near the low end of its trading range since mid-August.

The Bank of Japan is expected to keep its policy on hold later in the day.

Due to worry about Evergrande, market is still in risk-off mood, with both the dollar and yen supported. My sense is the yen has been generally shorted by many players, so there could be room for longer short covering, said Tohru Sasaki, head of Japan markets research at JP Morgan.

Evergrande, once China's top developer of tangible asset, is near a key deadline on Thursday when the firm is due to pay $83.5 million in interest for its March 2022 bond.

The bonds would be deemed in default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

Investors also look at how mainland China markets will react when they reopen on Wednesday after a four day weekend.

Ahead of the onshore trading, the Chinese yuan was held in the offshore trading at 6.4845 per dollar, near one month low of 6.4878 set on Monday.

Another major focus for the day is the U.S. Federal Reserve, who is expected to drop more hints on its future policy path, including when to start tapering its bond buying and when to start raising interest rates.

There are growing expectations that the central bank will signal it plans to start reducing its massive bond purchases in November if incoming data holds up.

The so-called Dot Plot which charts policymakers economic and rates projections will attract attention for clues on when the Fed will hike its interest rates from the current near zero level.

Perhaps tapering is baked in? What will matter the most for the currency market is how dot-plots or comments from Powell will affect U.S. rate expectations, said JP Morgan's Sasaki.

The Canadian dollar stood little changed annuation elsewhere, with the gains trimmed by Prime Minister Justin Trudeau on Tuesday following a tightly contested election.

Bitcoin was fragile, with bitcoin hitting a one month low of $39,573, since falling more than 25% from its four-month peak just two weeks ago.

The digital currency stood last at $40,450 while ether dropped to $2,732, down more than 30% from a four-month peak this month.

The United States on Tuesday unveiled sanctions against a cryptocurrency exchange over its alleged role in enabling illegal payments from ransomware attacks.