* Graphic: World FX rates tmsnrt.rs/2RBWI5E
(Adds comments from Fed officials, updates prices)
By Karen Brettell
NEW YORK, June 21 (Reuters) - The dollar retreated from two-month highs on Monday as investors evaluated
whether a perceived hawkish tilt by the Federal Reserve last week will mark a pause in the dollar bear trend
that has been in play since March 2020.
The dollar has surged since the U.S. central bank on Wednesday said that policymakers are forecasting
two rate hikes in 2023. That led investors to re-evaluate bets that the U.S. central bank will let inflation
run at higher levels for a longer time before hiking rates.
The greenback dropped on Monday but held above where it traded before the Fed's statement on Wednesday.
"There was a rush to clean out outstanding positions that were a little bit maybe too skewed towards
dollar shorts," said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto. Now,
"the market's trying to catch its breath a little bit before it really decides whether or not to extrapolate
this trend towards a stronger dollar."
The dollar had weakened on expectations that the Fed will hold rates near zero for years to come even as
the economy rebounds from COVID-19 pandemic-related shutdowns.
Two regional Federal Reserve officials said on Monday that a faster withdrawal from the central bank's
bond purchase program could give it more leeway in deciding when to raise interest rates.
New York Fed President John Williams also said that more progress is needed before the Fed should begin
to scale back some of its economic support.
Comments by Fed Chair Jerome Powell will be in focus on Tuesday to see if he confirms the hawkish
outlook or tries to row back market expectations of faster tightening.
Powell said last week there had been initial discussions about when to pull back on the Fed's $120
billion in monthly bond purchases, a conversation that would be completed in coming months as the economy
continues to heal.
The dollar index against a basket of currencies fell 0.44% on the day to 91.849. The euro
gained 0.41% to $1.1917 and the greenback gained 0.03% to 110.29 Japanese yen.
The British pound gained 1.03% to $1.3933.
Some analysts say the recent market moves have been exaggerated by investors unwinding crowded trades,
and that the dollar still faces weakening pressures as the global economy recovers.
"The core thesis underpinning our USD weakness view has not changed drastically," Wells Fargo analysts
said on Monday in a report.
"For one, the global economic recovery is still gathering pace and broadening in scope. Moreover, while
the Fed's dots sent a hawkish signal, Chair Powell continued to talk down the risks of a near-term taper. In
any case the Fed still looks likely to lag many of its G10 peers in reducing accommodation," they said.
Producer price inflation data on Friday will also be in focus for any signals that price pressures may
stay higher for longer, which could prompt sooner-than-expected Fed tightening.
"If inflation data comes in a little bit firmer than expected, or is a little bit stickier than
expected, then that could portend to more aggressive timelines for the Fed to remove accommodation," Rai
said.
In cryptocurrencies, bitcoin's poor recent run continued with a 8.89% drop to $32,390, as
China expanded restrictions on mining to the province of Sichuan.
Cryptomining in China accounts for more than half of global bitcoin production.
========================================================
Currency bid prices at 3:28PM (1928 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 91.8490 92.2620 -0.44% 2.076% +92.3750 +91.8260
Euro/Dollar $1.1917 $1.1869 +0.41% -2.46% +$1.1922 +$1.1848
Dollar/Yen 110.2900 110.2500 +0.03% +6.77% +110.3300 +109.7400
Euro/Yen 131.44 130.73 +0.54% +3.56% +131.4500 +130.0600
Dollar/Swiss 0.9179 0.9232 -0.50% +3.83% +0.9236 +0.9176
Sterling/Dollar $1.3933 $1.3792 +1.03% +1.98% +$1.3936 +$1.3787
Dollar/Canadian 1.2359 1.2463 -0.83% -2.94% +1.2486 +1.2355
Aussie/Dollar $0.7538 $0.7478 +0.82% -2.00% +$0.7546 +$0.7478
Euro/Swiss 1.0939 1.0946 -0.06% +1.22% +1.0964 +1.0935
Euro/Sterling 0.8552 0.8586 -0.40% -4.31% +0.8601 +0.8550
NZ $0.6992 $0.6932 +0.89% -2.61% +$0.6999 +$0.6935
Dollar/Dollar
Dollar/Norway 8.5735 8.6685 -1.08% -0.14% +8.7180 +8.5670
Euro/Norway 10.2191 10.2750 -0.54% -2.38% +10.3403 +10.2030
Dollar/Sweden 8.5294 8.5873 -0.49% +4.06% +8.6386 +8.5254
Euro/Sweden 10.1646 10.2150 -0.49% +0.88% +10.2395 +10.1595
(Reporting by Karen Brettell; editing by Jonathan Oatis and Will Dunham)
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