By Stanley White and Kevin Buckland

TOKYO (Reuters) – The dollar was hemmed into a narrow trading range near multi-week lows against its major peers on Friday, as traders contemplate the next moves by major central banks ahead of a U.S. Federal Reserve meeting next week.

Cryptocurrency ether tumbled more than 10% and bigger rival bitcoin slid 5% amid speculation that U.S. President Joe Biden’s plan to raise capital gains taxes will curb investment in digital assets.

The euro nursed losses after European Central Bank President Christine Lagarde squashed expectations that policymakers will start to consider a tapering of bond purchases due to an improving economic outlook.

Fed Chairman Jerome Powell is likely to repeat Lagarde’s message that talk of tapering is premature, which would put downward pressure on Treasury yields and cap the dollar’s gains against most currencies.

“Powell has to reiterate the continuation of easy monetary policy just like Lagarde,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“As a result, the dollar is likely to fall against the yen, but the larger trend for the dollar is still mixed. The dollar can still rise against commodity currencies if commodity prices start falling again.”

The dollar slid as low as 107.80 yen on Friday, the lowest since March 4.

The euro stood at $1.2027 after dropping 0.2% on Thursday. It was still not far from the seven-week high of $1.2080 set earlier this week.

The Australian and New Zealand dollars firmed on Friday, but traders said risks are pointed to the downside due to a recent weakening in commodity prices.

The British pound was quoted at $1.38535 following a 0.6% loss the previous session.

The Fed’s next meeting ends on April 28, and while no major policy changes are expected, investors are paying close attention to any comments about the chance of scaling back monetary easing in the future.

Rising coronavirus vaccination rates and an improving economic outlook are reasons to be optimistic, but investors are scaling back expectations for a withdrawal of monetary easing after Lagarde said talk of phasing out emergency bond purchases is premature, analysts said.

Data on manufacturing and services activity in both the United States and Germany are due later on Friday, which could support positive economic sentiment, but the dollar and the euro are unlikely to move much as investors stick to the sidelines before the Fed’s meeting, analysts said.

In cryptocurrencies, ether was some 7% lower at about $2,234 and earlier dipped as low as $2,116, retreating from the record high of $2,645.97 set on Thursday after President Biden unveiled a plan to nearly double taxes on capital gains for people earning more than $1 million.

Bitcoin slumped 4.2% to below $50,000, and briefly touched $48,338. It has fallen every day but two since reaching a record high of $64,895.22 on April 14.

(Reporting by Stanley White; Editing by Richard Pullin and Jacqueline Wong)