Commodity currencies at multi-month highs, sterling firm on BoE rate hike bets



* Aussie dollar, Canadian dollar lead gains

* Sterling firm on rising BoE rate hike expectations

* Yen on back foot as higher energy prices bite

* Bitcoin slips from record high, ether firmer

By Hideyuki Sano

TOKYO, Oct 21 (Reuters) - Commodity currencies stood near multi-month highs on Thursday on strong raw material prices, while the improved mood chipped away at demand for the safe-haven U.S. dollar, which has recently been supported by expectations of Federal Reserve tapering.

Sterling was also riding high on firming perceptions the Bank of England (BoE) will raise interest rates as soon as next month to curb inflation, despite softer-than-expected UK price data on Wednesday.

"It looks almost certain that the BoE will raise interest rates in November, perhaps again in December, as inflation could get out of control otherwise given a severe labour shortage," said Yukio Ishizuki, senior strategist at Daiwa Securities.

"And globally we are likely to see rate hikes to curb inflation in many countries, which means the U.S. dollar is standing out less than before, in terms of rate hike expectations."

The dollar's index dipped 0.10% to 93.514 =USD , holding barely above Tuesday's three-week low of 93.501. It has declined 1.1% from a 15-month peak hit last week. Expectations that the Fed could soon scale back pandemic-era stimulus has underpinned the dollar over the past few months.

Commodity currencies led gains against the dollar as oil prices hit their highest levels in many years.

The Canadian dollar rose about 0.2% to C$1.2295 per U.S. dollar CAD=D4 , hitting a high last seen in late June, also thanks to higher-than-expected Canadian inflation data.

The Australian dollar also extended its bull run to hit a 3-1/2-month high of $0.7545 AUD=D4 while the New Zealand dollar hit a four-month peak of $0.7212 NZD=D4 .

"Given the massive rise in commodity prices, commodity-linked currencies will enjoy a tailwind," said Teppei Ino, senior currency strategist at MUFG Bank.

Oil prices have been supported by strong demand as countries started to reopen their economies, while a global coal and gas crunch showed little sign of abating. U.S. crude and fuel inventories have tightened sharply.

Brent crude futures LCOcv1 hit its highest level since 2018, while U.S. crude futures CLc1 were at their loftiest level since 2014.

The British pound stood at $1.3828 GBP=D4 , just shy of its Tuesday peak of $1.3834, its highest level in over a month.

Against the euro, sterling was near its highest levels since February 2020, at 84.26 pence per euro EURGBP=D4 .

The UK currency held momentum due to rising expectations of a BoE rate hike.

British overnight indexed swaps are pricing in about 80% chance of a 0.25% rate hike on Nov. 4.

"It's as if the BoE is stealing the spotlight from the Fed as it looks likely to raise rates before the Fed," said Kyosuke Suzuki, president of Financial algotech company at Ryobi Systems.

"What could be the game changer, though, is if the Fed is also jumping on the bandwagon of global rate hikes much sooner than expected," he added.

The Federal Reserve is widely expected to announce tapering of its bond purchase at a policy meeting in early November, but it is expected to distance itself from future rate hikes for now.

Money markets are pricing in one U.S. rate hike in 2022, after the Fed is expected to have finished its tapering process in the middle of next year.

The euro held firm at $1.1664 EUR= , staying close to Tuesday's three-week peak of $1.1670.

The positive risk mood weighed on the Japanese yen, often perceived as a safe-haven currency.

The dollar stood at 114.39 yen JPY= , near Wednesday's four-year high of 114.695 yen.

The yen is dented by expectations that its trade deficit could widen as rising oil prices boost its imports bill while its car exports are hampered by chips shortages.

In cryptocurrencies, bitcoin slipped 1.8% to $64,789 BTC=BTSP , after having hit a record high of $67,016 the previous day.

Ether climbed 0.7% to $4,194 ETH= , edging near its record peak of $4,380 hit in May.

========================================================

Currency bid prices at 0309 GMT Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Euro/Dollar

EUR=EBS

$1.1666

$1.1650

+0.13%

-4.52%

+1.1667

+1.1650 Dollar/Yen

JPY=EBS

114.2800

114.2600

+0.04%

+10.66%

+114.4100 +114.2300 Euro/Yen

<EURJPY=EB 133.31

133.20

+0.08%

+5.03%

+133.3600 +133.1700

S>

Dollar/Swiss

CHF=EBS

0.9186

0.9189

-0.03%

+3.84%

+0.9195

+0.9186 Sterling/Dollar GBP=D3

1.3829

1.3823

+0.03%

+1.21%

+1.3830

+1.3822 Dollar/Canadian CAD=D3

1.2294

1.2316

-0.20%

-3.47%

+1.2325

+1.2289 Aussie/Dollar

AUD=D3

0.7540

0.7516

+0.35%

-1.96%

+0.7546

+0.7513 NZ

NZD=D3

0.7216

0.7201

+0.21%

+0.49%

+0.7218

+0.7195 Dollar/Dollar

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX



World FX rates Link



Reporting by Hideyuki Sano; Editing by Sam Holmes and Ana
Nicolaci da Costa

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