By Alun John

HONG KONG (Reuters – Monday’s dollar trade was stable ahead of U.S. Federal Reserve’s Jan policy meeting. However, bitcoin tumbled to a near six-month low over the weekend. This is due to a fall in technology stocks.

The Fed is holding the markets in its stride. In a morning paper, Frederic Neumann (HSBC’s cohead of Asian economics research), stated that the Fed has taken markets by the leash.

Current currency markets are driven by attempts to predict the timing and pace of central bank interest rate increases and whether stimulus programs will be implemented.

Neumann stated that investors will look for guidance from Powell at the press conference on quantitative tightening in 2022. He also said that they were not anticipating any policy changes.

Two-day Fed rate-setting Federal Open Market Committee meeting begins Tuesday. Analysts are starting to speculate it’s possible but unlikely that it will raise interest prices for the first times since the pandemic.

“We consider the higher risk is the FOMC’s statement portrays an urgency to act soon, likely in March, in the face of very high inflation. Analysts at Commonwealth Bank of Australia (OTC), wrote in a note that this urgency might lead to an abrupt halt to quantitative easing in February.

They added that a bullish announcement and/or an earlier end to QE could encourage markets to price the risk of a 50bp rate increase in March.”

The was at 95.682 Monday morning, which is the average of six major peer countries.

This week’s traders agenda includes the Bank of Canada’s January Meeting, ending just before the Fed. A rate increase is possible. Tuesday’s Australian inflation data is due Tuesday. These will be used to guide the Reserve Bank of Australia at its next meeting.

The lower end of the recent range was $0.7180 at Monday morning. Last week, traders sold risky assets like equities as well as riskier ones like cryptocurrency to make the currency more risk-friendly.

It was $36,026, down 10% Friday, and as low as $34,000 Saturday. This is its lowest point since July 2021.

Since November’s record high of $69,000, the world’s most valuable cryptocurrency has almost doubled its value.

Most digital assets were affected by the sell-off. Similarly, ether, second largest cryptocurrency in the world, was trading at $2,516, having also fallen to $2,300 on Saturday.

The trader claims that institutional investors increasing exposure to crypto currencies means their moves will be more closely linked with other risk assets.

It lost 7.5% last week, the worst week since March 2020.

Traditional currency markets had sterling at $1.3551 and the euro at $1.1333.

With one dollar at 113.7yen, the currency was not too far away from the previous 113.47 level touched 10 days before, the yen was on the strong end of its current range. If the dollar falls below this level, it will be at its lowest point for five weeks.