FOREX-Dollar holds firm as inflation tugs yields higher

       * Dollar steadies on euro and yen
    * Soaring inflation briefly sends NZD to 1-month high
    * Bitcoin loiters near record peak

    By Tom Westbrook
    SINGAPORE, Oct 18 (Reuters) - The U.S. dollar found a
footing on Monday as soft economic data in China and climbing
oil prices jangled investors' nerves that inflation will drive
interest rates higher.
    In the Asia session the greenback climbed a touch along with
U.S. yields to arrest a dip it suffered last week. It rose about
0.2% against the euro and about 0.1% against the yen to take the
Japanese currency close to a fresh three-year low.
    The kiwi was an outlier, having jumped almost 0.5%
to a one-month high of $0.7105 before easing back to flat at
$0.7071 after a decade-high quarterly inflation reading.
    Sterling also managed to hold on close to steady
after hawkish weekend remarks from Bank of England Governor
Andrew Bailey who said policymakers "will have to act" as energy
prices drive consumer prices higher.
    China's economic growth hit its slowest pace in a year in
the third quarter, data showed on Monday, with power shortages
crimping factory output - while in commodities, crude prices
rose more than 1% to test 2018 highs.
    The yuan eased slightly after the data. But taken
together, China's slowdown, power crunch and worldwide signs
that pressure from energy costs is hurting, seemed to turn
investors broadly cautious as they brace for a bumpy period.
    "For some time our central argument has rested on two
factors coming together to support the dollar, namely the
moderation in global growth and the Fed taking a gradual path
towards eventual rate hikes," HSBC analysts said in a note.
    "This occurred sooner than we expected."
    The dollar last bought 114.35 yen, traded at
$1.1579 against the euro and was up roughly 0.2% at
$0.7402 per Australian dollar.
    The dollar index rose 0.1% to 94.102, edging it back
toward last week's one-year high of 94.563.
    Bitcoin, vaunted as an inflation hedge and riding
high on hopes for U.S. approval of a futures-based exchange
traded fund that would funnel cash into the sector, hovered just
shy of its record peak of $64,895. It last bought $62,393.

    HIKES LOOM IN 2022
    Minutes from September's Federal Reserve meeting published
on Wednesday, affirmed traders' expectations that the central
bank will start tapering asset purchases this year. The minutes
showed policymakers readying to start tapering soon and wrapping
up the process by the middle of next year.
    Fed funds futures are priced for rate rises to begin
soon after that is complete, with markets having pulled forward
hike expectations to as soon as the third or fourth quarters of
2022, while two-year Treasury yields jumped to a
19-month high of 0.421%.
    Swaps pricing also shows mounting pressure globally with an
almost 30% chance of a Bank of England rate hike this year and
nearly 80 basis points of hikes priced through 2022.
    Sterling held at $1.3734, just below Friday's one-month high
of $1.3773.
    In New Zealand, where consumer prices zoomed higher at their
fastest clip since 2010, analysts reckoned the central bank
would need to stay the course on its hiking trajectory even as
the lockdown of Auckland was extended.
    "It just reinforces the case that they do need to stick to
that path," said Westpac analyst Imre Speizer. "Inflation is
very strong."
    Even in Australia, where the central bank has insisted it
expects to keep rates on hold until 2024, swaps are pricing
hikes to start in mid-2022 and for 100 bps of increases before
2024 even begins.
    With a quiet calendar on Monday, traders are looking ahead
to the release of the Fed's 'beige book' of economic conditions
on Wednesday and keeping an eye on China's credit markets where
a number of developers owe coupon payments this week.

    Currency bid prices at 0549 GMT
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change
 Euro/Dollar                  $1.1580        $1.1599     -0.15%         -5.21%      +1.1602     +1.1578
 Dollar/Yen                   114.3200       114.2000    +0.11%         +10.69%     +114.4450   +114.0300
 Euro/Yen         Dollar/Swiss                 0.9251         0.9231      +0.19%         +4.53%      +0.9252     +0.9232
 Sterling/Dollar              1.3726         1.3745      -0.13%         +0.48%      +1.3764     +1.3725
 Dollar/Canadian              1.2397         1.2359      +0.34%         -2.62%      +1.2400     +1.2350
 Aussie/Dollar                0.7404         0.7419      -0.20%         -3.74%      +0.7436     +0.7400
 NZ                           0.7064         0.7072      -0.11%         -1.63%      +0.7105     +0.7040

All spots
Tokyo spots
Europe spots
Tokyo Forex market info from BOJ

 (Editing by Richard Pullin and Jacqueline Wong)

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