Dollar, yen rise as risk sentiment declines ahead of Fed

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Dollar, yen rise as risk sentiment declines ahead of Fed
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The safe-harbour yen and dollar started the week firmer against riskier currencies like the Aussie as rising COVID-19 cases and a decline in Asian equities set a cautious tone ahead of the Federal Reserve's meeting this week.

The yen rose about 0.5% to 81.08 per Australian dollar on Monday, while the dollar gained 0.2% to $0.7351 per Aussie , approaching an almost eight-month high of $0.72895 reached last week.The euro rose 0.1% to $1.17795, stabilizing after its drop last week to the lowest since early April at $1.1752.

Commonwealth Bank of Australia projects the dollar can continue to strengthen this week on the possibility of the Fed moving a step closer to tapering at the conclusion of its two-day policy meeting on Wednesday. The risk to such an outlook is the rise in COVID-19 cases in the United States, coming after the Fed at its last meeting on June 16 dropped a reference to the coronavirus as a drag on the economy."Overall, the Fed is expected to hold a rather neutral stance before the Jackson Hole symposium in late August, while risks are biased to dovish side given the Delta variant spread," Mizuho Bank strategist Ken Cheung wrote in a report.

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