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Dollar recoups steep losses vs yen; focus on Fed minutes

The dollar rebounded from one of its worst performances against the yen on Wednesday as the outlook for the greenback brightened on expectations for stronger economic data given better U.S. weather conditions.

The dollar on Tuesday posted its largest one-day fall versus the yen in more than seven months, with investors buying back the Japanese currency after the Bank of Japan held off on additional monetary easing. The greenback's bounce was the first in four days.

After hitting lows of 101.52 yen in U.S. trade on Tuesday, the dollar recovered to trade 0.1 percent higher near 102 on Wednesday. The euro was also up 0.2 percent near 141.

Investors are also focusing on the minutes of the latest Federal Reserve meeting to be released on Wednesday. They are likely to show that members of the Federal Open Market Committee generally agreed on tapering the Fed's bond-buying program.

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Analysts will also look for clues about the interest rate cycle given mixed signals from several recent Fed speakers.

Chicago Fed President Charles Evans, a well known non-voting dove, suggested on Tuesday that with low inflation in the United States and globally, one of the biggest risks is prematurely withdrawing from an accommodative policy.

On the other hand, Philadelphia Fed President Charles Plosser, a voting hawk, had suggested that quantitative easing is not the answer to low inflation.

The Swedish crown, meanwhile, was one of the biggest movers on Wednesday, falling versus the euro, after the Riksbank signalled it was moving closer to cutting interest rates.

Dealers from Scandinavian banks said the central bank's lowering of its projected path for rates opened the way to a push towards 9.05 crowns per euro, although there would be some caution ahead of inflation numbers due on Thursday.

The euro rose about 0.4 percent against the Swedish crown near 8.98.

Euro Resiliance

One striking trend on the majors since last week is the euro's resilience in the face of signals from the European Central Bank that it is prepared to consider outright money printing to support growth if need be.

A number of dealers said the euro zone common currency was being supported by China's need to re-order the balance of currencies it holds in its reserves after buying billions of dollars last month to weaken the yuan. Similarly, many pointed to signs of intervention by South Korean authorities overnight that may support the euro.

The refloating of the euro zone's struggling southern states on bond markets, exemplified on Wednesday by Greece's announcement of its first bond sale in four years, has also drawn capital back into Europe this year.

The euro was up 0.1 percent against the dollar at $1.38, and firmly in the upper half of its recent range.

--By Reuters

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