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FOREX-Dollar eases after Fed-minutes fuelled bounce; bitcoin volatile

* Graphic: World FX rates tmsnrt.rs/2RBWI5E

LONDON, May 20 (Reuters) - The U.S. dollar edged lower on Thursday but remained well above three-month lows hit overnight after minutes from the Federal Reserve’s last policy meeting revealed there was more talk of tapering its bond purchases than investors had expected.

In the Fed minutes, several policymakers said that a discussion about reducing the pace of asset purchases would be appropriate “at some point” if the U.S. economic recovery continues to gain momentum.

That surprised markets with some investors unwinding some of their short dollar positions as they believed the Fed would remain on hold for the foreseeable future despite strong data.

However, the dollar’s overnight gains looked set to run out of steam in early London trading with the greenback declining against most of its peers. Against a basket of its rivals , the dollar was down 0.25% at 90.00 but remained well above a late-February low of 89.686 hit on Wednesday.

“The Fed minutes might end the recent period of dollar weakness for now, but it is still too early for a trend reversal,” Commerzbank strategists said in a daily note.

The dollar has been declining over the past few weeks as key Fed officials have repeatedly said they were not ready to discuss reducing stimulus, judging spikes in inflation would be transient.

The biggest beneficiary of the weak dollar trend was the Aussie dollar which also received a boost from robust April jobs data. It was up 0.4% at $0.7749.

The euro hopped 0.2% higher at $1.22 after having slipped 0.4% in the previous session and off a three-month high of $1.2245.

Cryptocurrencies were volatile after suffering one of their biggest losses on Wednesday in the wake of China’s decision to ban financial and payment institutions from providing digital currency services.

Bitcoin last traded up 10% at $40,526, having fallen to as low as $30,066 on Wednesday, which represented a whopping 54% fall from its record high hit just over a month ago.

Smaller rival Ether gained 13% at $2,765. On Wednesday, it fell 22.8%, its biggest daily fall since March 2020.

Reporting by Saikat Chatterjee; Additional reporting by Hideyuki Sano in TOKYO; Editing by Peter Graff

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