Dollar on track for worst month since March as expectations rise

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Dollar on track for worst month since March as expectations rise

Yen set for worst month since March Yuan poised for monthly drop China markets shut for one week from Friday For Anushka Trivedi and Kevin Buckland TOKYO, Sept 30 Reuters - The greenback hovered near a mid-year high versus major peers on Thursday as expectations mounted that the Federal Reserve will taper stimulus from November, while the commodity-linked Aussie dollar benefited from a bounce in iron ore prices. The safe-haven dollar amade sharp gains over the past two sessions in hopes that the Fed could withdraw economic support as global growth slows and inflation is high. Spiking bonds yields added to currency's firmness. Its rise is despite an impasse in Washington over the U.S. debt ceiling which threatens to plunge the government into a shutdown. The dollar index - which measures the currency against a basket of six rivals - stood at 94.327, little changed from Wednesday when it hit 94.435 for the first time since late September last year. Yields of the benchmark 10 Year Treasury note stood at 1.5341%, holding near a mid-June high reached Tuesday at 1.5670%. A combination of higher U.S. yields, impending Fed tapering and skittish markets around the debt ceiling have fuelled this move in Dollar Westpac analysts wrote in a client note. The issue of whether to raise or suspend the debt ceiling would likely extend to mid-October, after which the dollar will likely be supported by money markets with rate hikes, they added. The dollar bought 111.97 yen, little changed from Wednesday when it reached 112.05 for the first time since February 2020. It was on track for its worst monthly performance since March. The euro was mostly flat at $1.15995, holding near Wednesday's 14 month low of $1.15895 Speaking at a European Central Bank forum on Wednesday, Fed Chair Christine Lagarde and Reserve Governor Andrew Bailey said they were monitoring inflation following a surge in energy prices and production bottlenecks. The risk-sensitive Australian dollar rallied 0.5% to $0.7206, after overnight falling 0.9% as iron ore prices rallied ahead of the Golden Week holiday in China's top trading destination. A rebound in monthly Chinese services data also looks to have gone some way to allaying fears that the apparent slowdown in China growth of late is accelerating to the downside, buoying the Aussie, said Ray Attrill, NAB's head of FX strategy. Sterling edged up $1.34357 to $1.3412 but remained near the nine-month low of $2.3412 reached overnight on worries about rising natural gas prices and almost a week of petrol shortages in Britain. A slight improvement in the global risk sentiment after days of gloom was seen on the cryptocurrency markets, as bitcoin rose 5% to $43,567 and ether bounced 6.4% to $3,034 with Bitcoin rising 6.4% to $43,567. Both coins are down from their September peak of 20% - 27%.