(Updates prices, adds analyst comment)
By Iain Withers
LONDON, May 9 (Reuters) - The dollar edged up against
major currencies on Tuesday as traders awaited U.S. debt ceiling
talks and new inflation data for a clearer picture of the
outlook for the economy and U.S. interest rates.
Data on Tuesday - showing China's imports contracted sharply
in April from a year earlier while exports grew more slowly than
in March - had a limited impact on currencies, but contributed
to risk-off moves broadly across markets.
Closely-watched U.S. inflation data due on Wednesday is
likely to set the tone for markets, after stronger-than-expected
jobs data last week.
Any Fed policy tweaks will have to be weighed against a
backdrop of recent turmoil in the U.S. banking sector and a
political impasse in Washington over resolving the country's
debt ceiling and avoiding a default, analysts said.
"Overall, the data highlights that it is not yet a done deal
that the Fed will not raise rates further although we agree with
market pricing that there is a higher hurdle now especially with
the upcoming US debt ceiling stand-off," currency analysts at
MUFG said in a note.
The Federal Reserve's quarterly survey of bank loan officers
on Monday showed that credit conditions for U.S. businesses and
households continued to tighten at the start of the year.
The closely watched survey was among the first measures of
sentiment in the banking sector since the recent run of bank
failures, sparked by Silicon Valley Bank's collapse in March.
Against a basket of currencies, the U.S. dollar index edged up 0.1% to 101.5, but remained near recent lows as traders
eye a peak in U.S. interest rates. The euro dipped 0.2% to $1.09800.
The Japanese yen rose 0.3% to 134.790 per dollar,
aided by comments from Bank of Japan (BOJ) Governor Kazuo Ueda
that the central bank may end its yield curve control policy and
start shrinking its balance sheet.
Elsewhere, sterling was broadly flat and bought
$1.26190, ahead of Thursday's central bank policy meeting.
The Bank of England looks set to raise interest rates to
4.5%, as it tries to fight the highest inflation rate in Western
Europe.
Kenneth Broux, head of corporate research for FX and rates
at Societe Generale, said sterling had been holding up better
than the euro versus the dollar given the possibility of a
hawkish tone from the BoE alongside the expected rate hike.
"EUR/GBP, keeps losing altitude after the break of the 200
(day moving average) last week," he said.
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(Reporting by Iain Withers, Additional reporting by Alun John
in London and Rae Wee in Singapore, Editing by Angus MacSwan and
Christina Fincher)
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