FOREX-Dollar subdued by Fed minutes, Swedish crown firm on inflation data

Reuters

* Dollar stays near one-week lows vs currency basket

* Fed minutes indicate bond-buying will end in October

* Swedish crown at 1-week high after inflation data

By Anirban Nag

LONDON, July 10 (Reuters) - The dollar was stuck near one-week lows against a basket of major currencies on Thursday, staying on the back foot after minutes of the Federal Reserve's June meeting gave no clear indication about the timing of an interest rate rise.

In the European session, the Swedish crown rose to a one-week high against the euro after data showed consumer prices in Sweden rose more than expected. That drove some investors to trim short bets against the currency made after a sharp interest rate cut by the country's central bank last week.

The focus though was on the dollar. The Fed minutes confirmed the U.S. central bank's monthly bond purchases would probably end in October and showed that policymakers debated the complexities of unwinding a stimulus program that has flooded the financial system with over $2 trillion.

The uncertain outlook for the timing of the Fed's move has kept a lid on Treasury yields, with the two-year yield also hovering near one-week lows at around 0.48 percent. The dollar index, which has a good correlation with U.S. yields, was flat at 80.03 having hit a one-week low of 79.976 early in the Asian session.

"Anyone expecting anything hawkish from the Fed minutes would be disappointed," Jeremy Stretch head of currency strategy at CIBC World Markets, said. "Unless Treasury yields start moving up, to reflect the better data from the U.S., it would be a rather frustrating time for dollar bulls."

Against the yen, the dollar slipped about 0.15 percent to 101.50 yen, not far from a one-week low of 101.445 yen hit on Wednesday.

The euro was steady on the day at $1.3635 after rising to a one-week high of $1.3649 when the Fed minutes were released.

SWEDISH SURPRISE

Swedish consumer prices rose 0.2 percent in June from the previous month and were up 0.2 percent from the same month last year, easing some of the concerns about deflationary pressures in the economy.

The euro fell to 9.2200 crowns from around 9.2690 crowns before the inflation data was released, and down 0.4 percent on the day. The crown had hit a 3-1/2 year low against the euro last week after the Riksbank surprised investors by cutting the repo rate by 50 basis points.

"We would recommend investors to fade into the Swedish crown's rally as the central bank is unlikely to tolerate any additional tightening that can come through the currency's rise," Geoff Yu, currency strategist at UBS, said.

The Australian dollar, meanwhile, fell after a rise in the country's jobless rate raised concern about its stalled economy and stoked expectations that interest rates may remain on hold for months to come.

The Aussie shed 0.4 percent to $0.9374 after figures showed unemployment rose to 6.0 percent last month as more people went looking for work.

Putting further pressure on the Australian currency, trade data from China, the country's largest trading partner, showed exports grew less than expected in June.

(Editing by Jane Merriman)

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