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FOREX-Dollar hovers near one-month high with market frozen before Fed test

    * Dollar has been buoyed as cautious investors close shorts
    * Currency market volatility wallows at 16-month low
    * Traders watching for clues on timing of Fed tapering

    By Kevin Buckland
    TOKYO, June 15 (Reuters) - The dollar hovered below a
one-month high compared with major peers on Tuesday ahead of a
much-anticipated Federal Reserve meeting that could signal a
change in the outlook for U.S. monetary policy.
    The U.S. currency has been buoyed as traders closed short
positions before the Fed's two-day policy-setting confab, which
kicks off on Tuesday.
    The dollar index, which measures the greenback
against a basket of six currencies, was flat early in Asia at
90.517. It has pushed briefly above 90.60 in each of the last
two sessions, and 90.63 would be the strongest level since May
14. 
    Traders will be watching carefully for clues on when
policymakers will start tapering dollar-depreciating stimulus.
    So far Fed officials, led by Chair Jerome Powell, have
stressed that rising inflationary pressures are transitory and
ultra-easy monetary settings will stay in place for some time to
come, although recent economic data has raised concerns that
price pressure after the post-COVID-19 economic reopening could
force an earlier stimulus withdrawal.
    "While Powell will tread carefully, I expect that the Fed is
warming to a more open discussion about tapering, to be formally
announced in the September meeting," Chris Weston, head of
research at broker Pepperstone in Melbourne, wrote in a note to
clients.
     "Any view that cements a formal announcement in September
should be modestly USD bullish, but the risks are symmetrical as
Powell will be keen to not hurt financial conditions," he wrote.
    Nearly 60% of economists in a Reuters poll expect a tapering
announcement in the next quarter, despite a patchy recovery in
the job market.
    Currency markets settled in tight ranges with implied
volatility plumbing multi-month lows after last week's strong
inflation readings and a dovish European Central Bank meeting
failed to dislodge currencies from recent trading levels.
    The Deutsche Bank FX Volatility Index plunged to
5.6 on Friday, its lowest in nearly 16 months, and remained just
above that level this week.
    The euro was little changed at $1.21185 on
Tuesday, near an almost one-month low at $1.20930 reached on
Friday.
    The yen was at 110.075 per dollar, almost flat
from Monday, after a more than 0.3% slide in each of the past
two sessions.
    In cryptocurrencies, bitcoin traded above $41,000
for the first time in more than two weeks on Monday, and was
last around $40,495 after rallying from below $35,000 on Sunday
after Tesla Inc boss Elon Musk tweeted that the
electric carmarker would resume allowing bitcoin transactions
when miners who verify transactions use more renewable energy.

    Ether also got a small lift in sympathy with its
bigger rival, but remained well within recent ranges at
$2,605.54 on Tuesday.
    
========================================================
    Currency bid prices at 020 GMT
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar                  $1.2118        $1.2121     -0.02%         -0.82%      +1.2123     +1.2114
 Dollar/Yen                   110.0700       110.0650    +0.01%         +6.57%      +110.0800   +110.0600
 Euro/Yen         <EURJPY=EB  133.38         133.39      -0.01%         +5.09%      +133.4300   +133.3600
                  S>                                                                            
 Dollar/Swiss                 0.8995         0.8995      +0.02%         +1.69%      +0.8997     +0.8997
 Sterling/Dollar              1.4112         1.4105      +0.05%         +3.29%      +1.4112     +1.4105
 Dollar/Canadian              1.2139         1.2149      -0.04%         -4.63%      +1.2147     +1.2140
 Aussie/Dollar                0.7712         0.7712      +0.01%         +0.26%      +0.7716     +0.7709
 NZ                           0.7148         0.7144      +0.02%         -0.49%      +0.7148     +0.7143
 Dollar/Dollar All spots
Tokyo spots
Europe spots 
Volatilities 
Tokyo Forex market info from BOJ 

    
 (Reporting by Kevin Buckland)
  
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