* Dollar on track for biggest weekly drop in three months
* Graphic: World FX rates in 2019
By Saikat Chatterjee
LONDON, March 15 (Reuters) - The dollar broadly fell against its
rivals on Friday and was on track for its biggest weekly drop in more
than three months, while the Australian and the Kiwi dollars were the
biggest gainers on news of more China stimulus plans.
China will cut value-added tax (VAT) for manufacturing and other
sectors on April 1, Premier Li Keqiang said on Friday. He promised to
take more steps to boost its economy.
That sent the Australian and the Kiwi dollar up by more than
a quarter percent each against the greenback in a broadly quiet day in
the currency markets after a volatile week.
The outlook for both those currencies is heavily correlated with
the outlook for the Chinese economy.
"This speaks to a foreign exchange market that had built up
reasonably large short positions in each currency but was forced to
cover on the news of China's tax reduction," said Stephen Gallo,
European head of FX strategy at BMO Capital Markets.
Broadly, the dollar was on the back foot, before a U.S. central
bank meeting next week where policymakers will shed more light on the
outlook for interest rates.
While no change in policy rates is expected next week after the
Fed paused a multi-year rate hiking cycle in January, officials might
strike a more cautious view on the outlook for the global economy
after a volatile week in currency markets.
"We are coming to the end of a very exhausting week in
currency markets with the Brexit news and investors are waiting to get
more insights from the Fed," said Esther Maria Reichelt, an FX
strategist at Commerzbank.
Against its rivals , the dollar fell 0.2 percent to 96.61. For
the week, it is set to weaken 0.7 percent, its biggest drop since
The yen remained firm after the Bank of Japan kept monetary
policy steady but tempered its optimism that robust exports and
factory output will underpin growth, giving a boost to its perceived
Elsewhere, the pound paused for breath but stayed on course for
its biggest weekly gain in seven weeks on growing expectations that
Britain won't crash out of the European Union without a deal on March 29.
Sterling last traded at $1.3217, below Wednesday's nine-month
high of $1.3380 but up 1.8 percent so far this week, the biggest such
gain since late January after the UK parliament voted to seek a delay
in Britain's exit from the European Union, following a decision to
avert a no-deal Brexit.
Short Bets against AUD grows
(Reporting by Saikat Chatterjee Editing by Mark Heinrich)
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