FOREX-Dollar steadies; Aussie dollar nears two-week highs - Yahoo Finance

* Currency markets quiet, holidays in China and Japan

* Dollar index down less than 0.1%

* Australian dollar close to two week highs

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E(Updates prices, adds commentary and detail)

By Elizabeth Howcroft

LONDON, Feb 11 (Reuters) - The dollar slipped slightly onThursday, after softer-than-expected U.S. inflation data forJanuary and a reiteration of the Federal Reserve's dovish policystance, but currency market moves were generally quiet due toholidays in Asian markets.

Currency market moves were small overnight because ofholidays in Japan and China, but the dollar fell close totwo-week lows against a basket of currencies, before recoveringsomewhat as European markets opened.

U.S. core inflation last month was zero, data showed onWednesday, against market expectations of 0.2%.

Federal Reserve Chair Jerome Powell said that while heexpected base effects and pent-up demand when the economy fullyreopens to boost inflation, that was likely to be transitory,citing three decades of lower and stable prices.

Powell also reiterated that the central bank's new policyframework could accommodate annual inflation above 2% for sometime before raising rates, reinforcing market expectations ofweak returns from the dollar.

"Any shift in the policy stance (to a hawkish, lessaccommodative side) is not imminent, US front end rates are toremain anchored, the US curve is set to steepen further and realrates are to remain deeply negative," ING FX strategists wrotein a note to clients.

"As the global economy starts its post winter recovery inQ2, this suggests more upside to cyclical currencies, whilenegative US real rates should also offer helping hands to thelow yielding ones, such as EUR vs the dollar," they said.

At 1200 GMT, the dollar was a touch lower on the day at90.391.

The euro was up around 0.1% against the dollar, at $1.2128. A European Commission forecast that the euro zoneeconomy will rebound less than expected in 2021 did not impactthe currency.

Powell's comments are keeping the dollar "somewhat on thedefensive but without any real definitive reasons to break outof ranges," said Jeremy Stretch, head of G10 FX strategy at CIBCCapital Markets.

"It’s been a pretty volatile first six weeks of the year andI think markets will perhaps just take a little bit of stock forthe next four or five days whilst Asian liquidity is limited andthe North American holidays play out," he said.

The Australian dollar -- which is seen as a liquid proxy forrisk appetite -- was up 0.3% at 0.7746 versus the dollar, closeto exceeding the previous session's two-week highs of 0.7756.

The British pound slipped slightly to $1.3826 at 1203 GMT,holding below the three-year high of $1.3865 reached onWednesday.

Oil prices fell, giving up some recent gains after Brentcrude strengthened for 9 sessions in a row. The commodity-linkedNorwegian crown eased off from Wednesday's one-year high againstthe euro and the pair changed hands at 10.262 at 1203 GMT.

Elsewhere, U.S. President Joe Biden and his Chinesecounterpart Xi Jinping spoke for the first time since the U.S.election. Biden said a free and open Indo-Pacific was a priorityand raised concerns about China's actions in Hong Kong, Xinjiangand Taiwan.

"President Biden seems to lay a ground of his China approachwhich might be somewhat different from Trump in a few aspects,but the bottom line is US sees China as a `strategiccompetitor'," Commerzbank senior economist Hao Zhou wrote in anote to clients.

With China's markets closed, the yuan showed little reactionto the phone call.

Bitcoin was trading at around $46,577 at 1204 GMT. The cryptocurrency, which is sometimes viewed as ahedge against inflation, has fallen around 3% since Tuesday'srecord high. Ethereum also dropped from recent record highs.

(Reporting by Elizabeth Howcroft, editing by Larry King andChizu Nomiyama)

Let's block ads! (Why?)