By Hideyuki Sano

TOKYO (Reuters) – The dollar held below a near one-month high on Wednesday as investors focused on two key risks — a default by Chinese property developer Evergrande and the expected pace of U.S. monetary policy tightening.

The stood at 93.226 in early Asian trade, staying not far off Monday’s one-month high of 93.455.

The euro was at $1.1725 after stabilising at $1.1700 at Monday’s one-month low.

Due to the cautious mood, the common currency saw a 7-month low in 127.93yen.

Near the bottom of its trading range from mid-August, the dollar was at 109.165yen.

Later in the day, it is likely that Bank of Japan will keep its policy at rest.

Due to Evergrande worries, both the dollar as well as the yen remain in risk-off markets. Tohru Sashi, JP Morgan’s head of Japan market research, stated that the yen is generally being shorted by many people so there may be more short-covering.

Evergrande is getting closer to the deadline for its March 2022 bond payment of $83.5 million. This is Evergrande’s former top selling property developer in China.

Evergrande failing to pay interest within the 30 day period of scheduled payments dates would render the bonds in default.

The investors also watch how the mainland Chinese markets react to Wednesday’s reopening after a four day weekend.

Ahead of the onshore trading, the was on the defensive at 6.4845 per dollar in the offshore trade, near one-month low of 6.4878 set on Monday.

FED LIFTOFF

Another major focus for the day is the U.S. Federal Reserve, which 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.

The central bank is expected to signal that it will begin reducing its large bond purchases by November, if the data continues to be reliable.

To find out when Fed interest rates will rise from their current low levels, look at the “dot chart”, which tracks the economic projections and rates of Fed policymakers.

Perhaps tapering has already been planned. The most important thing for the currency markets is the impact of Powell’s comments or dot-plots on U.S. rates expectations,” stated JP Morgan’s Sasaki.

The Canadian dollar was little affected by the losses made Tuesday, when Prime Minister Justin Trudeau and his Liberals were elected.

The cryptocurrencies suffered, as bitcoin fell more than 25% to $39,573 in the first half of January, after falling over 25% from its peak four months ago.

While bitcoin was last at $40,450, ether fell to $2,732, more than 30% below its earlier four-month high.

US sanctions were imposed Tuesday on a cryptocurrency exchange for its role in illegal ransomware payment payments.