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FOREX-Dollar on defensive for packed week of Fed speakers

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    • G20 drops pledge to avoid trade protectionism
    • Nine Fed policy makers to speak this week including Yellen
    • Polls favour Macron win ahead of French presidential debate

    The dollar slowly ceded ground in Asia on Monday with greenback bulls still nursing grudges after the Federal Reserve's rate guidance last week proved to be less "hawkish" than many had wagered on.

    There was limited initial reaction to the Group of 20 meeting over the weekend which retained the familiar form of words on currency intervention but dropped a pledge to avoid trade protectionism.

    "The G20 Meeting in Baden-Baden was notable for the impasse over free trade between most countries, which want to expand it, and the U.S. which wants to weaken it," wrote analysts at CBA in a note.

    "This is not a surprise for market participants judging from the Trump administration rhetoric."

    A holiday in Japan made for thin trading, leaving the dollar a fraction softer near two-week lows at 112.58 yen JPY= . That was some way from the March top of 115.51 and biased risks to a re-test of the February lows around 111.59/69.

    Against a basket of currencies, the dollar was 0.1 percent softer at 100.210 .DXY , having touched a five-week trough of 100.140 on Friday in the wake of the Fed's rate hike.

    The retreat left a double top on the charts at 102.25/26 that looks bearish for the near-term.

    The situation was much the same against the euro, which was holding firm at $1.0755 EUR= , having reached a six-week peak of $1.0782 on Friday. It now faces stiff chart resistance at the January top of $1.0828.

    Politics loomed large again with the first televised French presidential debate due later on Monday.

    Opinion polls out over the weekend showed centrist Emmanuel Macron and far-right leader Marine Le Pen were running neck and neck for the first round of voting in France's presidential election, due April 23. Yet they also showed Macron would beat her comfortably in the second-round run-off on May 7.

    Dealers were also braced for a packed week of Fed messaging with no less than nine different policy makers set to speak, including Chair Janet Yellen on Thursday.

    Yellen's cautious guidance last week has investors pricing in almost no chance of another rate rise at the next policy meeting in May, rising to around 50-50 for June. FEDWATCH

    "There will likely be a two month hiatus before the next overt signalling on a Fed rate hike, enough of a time lag not to immediately undermine the favourable risk and carry environment," said Alan Ruskin, head of forex at Deutsche.

    He also noted there was growing talk the European Central Bank might raise its deposit rates, currently in negative territory, before officially ending quantitative easing.

    The risk was enough to lift short-term German yields DE2YT=RR last week and narrow the dollar's rate advantage over the euro by around 15 basis points.

    This trend could help the euro up to around $1.1000 over the next few months, said Ruskin, though it would ultimately not prevent a stronger U.S. dollar later in the year.

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