FOREX-Dollar loiters near two-week low after soft U.S. inflation

    * Graphic: World FX rates

    By Tom Westbrook
    SINGAPORE, Feb 11 (Reuters) - The dollar was pinned near
two-week lows through a holiday-thinned Asia session on
Thursday, after soft U.S. inflation and another Federal Reserve
promise to keep rates low reinforced expectations of meagre
returns from the reserve currency.
    The Australian dollar sat just below a two-week top
touched overnight, while the euro held at $1.2119,
near its highest since Feb. 1.
    Sterling, also boosted by receding expectations for
negative interest rates in Britain, sat just shy of Wednesday's
nearly three-year peak of $1.3865.
    Moves were slight and trade was lightened by Lunar New Year
holidays in Japan and China. Against a basket of currencies
 the dollar sat at 90.387 after touching a two-week trough
of 90.249 in the wake of U.S. inflation figures.
    U.S. core inflation last month was zero, data showed on
Wednesday, against market expectations of 0.2%. 
    In a speech, Fed Chair Jerome Powell focused on still-high
unemployment and reiterated that the central bank's new policy
framework could accommodate annual inflation above 2% for some
time before hiking rates.
    "In other words, easy policy is going to stay there for a
long, long time, and that should be negative for the U.S.
dollar," said Westpac currency analyst Imre Speizer.
    "I think it'll be something that sits in the background, as
just a reminder that the U.S. dollar can't go up while it's got
that easy policy relative to everybody else."
    The dollar had pared some of its losses against other majors
a little bit after a selloff in U.S. tech stocks dampened
financial markets' upbeat mood. The safe-haven Japanese yen
 hit a two-week peak of 104.41 per dollar overnight and
last traded a fraction softer at 104.59 per dollar.
    Bitcoin, sometimes viewed as a hedge against
inflation, has dropped about 7% from Tuesday's record high and
traded at $44,786 on Thursday.
    Inflation is under the spotlight as economists expect
pent-up demand and a low-base effect from last year's shocks to
drive jumps in headline figures by the spring time, which some
investors think could test the Fed's resolve.
    In New Zealand, for example, where the virus is well
contained, surging accommodation prices have inflation running
above expectations and investors have scaled back what had been
further rate cut expectations.
    "The RBNZ arguably face quite a different communication
challenge (to the Fed), with the demand pulse in New Zealand in
a much better position than anyone dared hope," ANZ Bank
analysts wrote in a note to clients on Thursday.
    "The RBNZ will welcome this, but continue to highlight the
need for cautious patience."
    The New Zealand dollar was broadly steady at
$0.7222 on Thursday.
    Later on Thursday, European Commission economic forecasts
are due, as are U.S. labour market figures, with investors
looking to the data to gauge the relative progress in recovery.
    Currency bid prices at 12:37PM in Singapore (0437 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar                  $1.2122        $1.2119     +0.03%         -0.78%      +1.2125     +1.2114
 Dollar/Yen                   104.5900       104.6700    -0.07%         +1.26%      +104.6400   +104.5950
 Euro/Yen                     126.79         126.74      +0.04%         -0.10%      +126.8100   +126.7100
 Dollar/Swiss                 0.8900         0.8906      -0.07%         +0.60%      +0.8907     +0.8900
 Sterling/Dollar              1.3846         1.3836      +0.09%         +1.36%      +1.3850     +1.3821
 Dollar/Canadian              1.2692         1.2698      -0.02%         -0.31%      +1.2710     +1.2691
 Aussie/Dollar                0.7734         0.7723      +0.16%         +0.55%      +0.7738     +0.7713
 NZ                           0.7222         0.7215      +0.10%         +0.57%      +0.7224     +0.7205
 Dollar/Dollar All spots
Tokyo spots
Europe spots 
Tokyo Forex market info from BOJ

 (Reporting by Tom Westbrook; Editing by Sam Holmes)

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