Dollar slips with U.S. Treasury yields but still up for week; bitcoin falls

Saudi riyal, yuan, Turkish lira, pound, U.S. dollar, euro and Jordanian dinar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration

NEW YORK, Jan 21 (Reuters) – The U.S. dollar edged lower with U.S. Treasury yields on Friday, with investors looking ahead to next week’s Federal Reserve meeting for more clarity on the U.S. outlook for rate hikes.

Expectations that the Fed will tighten monetary policy at a faster pace than previously anticipated had driven a rise in yields and the dollar earlier this week, and the U.S. dollar index remained on track for its biggest weekly percentage gain since mid-December.

U.S. Treasury yields fell Friday as concerns about potential conflict in Ukraine dented risk appetite.

Markets are pricing in as many as four rate hikes this year, starting from March and expect the Fed to start trimming its $8 trillion-plus balance sheet within months. Next week’s Fed meeting could shed some light on how fast it will tighten.

“Everything is going to be somewhat calm” until the Fed releases its statement on Wednesday after the two-day meeting, said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

“It makes sense the dollar is somewhat muted today given the lack of real impetus from the data front.”

The dollar index, which tracks the greenback against major peers, was down 0.2% on the day at 95.555 but up 0.4% for the week so far.

In cryptocurrencies, bitcoin was also dragged lower, and was last down more than 4%.

Against the yen, the dollar was last down 0.3% at 113.685 , while the euro was up 0.3% againt the dollar at $1.1311.

Retail sales in Britain added recent weaker economic data. The pound was down 0.3% against the dollar at $1.3556. ,

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Currency bid prices at 10:53AM (1553 GMT)

Additional reporting by Iain Withers and Sujata Rao in London and Kevin Buckland in Tokyo; Editing by Hugh Lawson, Susan Fenton and Richard Chang

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