FOREX-Dollar under pressure as U.S. yields fall; yen, euro gain

Reuters

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    * U.S. yields tumble as traders pare Fed rate-hike outlook
    * U.S. trade deficit hits 10-year high; job growth slowing
    * Risk aversion returns

 (Updates rates, comments to U.S. market open; changes dateline,
previous LONDON)
    By Saqib Iqbal Ahmed
    NEW YORK, Dec 6 (Reuters) - The dollar weakened against
major peers on Thursday as U.S. Treasury yields tumbled and
traders scaled back expectations on the number of rate hikes the
Federal Reserve would implement amid weakening economic data and
heightened market volatility.
    The benchmark 10-year Treasury yield  US10YT=RR  hit a
three-month trough of 2.845 percent. It was last down 7 basis
points at 2.851 percent.  urn:newsml:reuters.com:*:nL1N1YB0QO
    The euro was 0.33 percent higher against the dollar at
$1.1382.
    "I think it is essentially a yields story for the U.S.
dollar today," said Shaun Osborne, chief FX strategist at
Scotiabank in Toronto.
    "The problem for the dollar is really a decline in U.S.
yields and fading Fed expectations," he said.
    Fed policymakers are still widely expected to raise interest
rates again at their Dec. 18-19 meeting, but the market focus is
on how many rate hikes will follow in 2019.
    Interest rate futures implied traders see no more than one
rate increase from the Fed in 2019, compared with expectations 
a month earlier for possibly two rate hikes, according to CME
Group's FedWatch program.
    The dollar has been under pressure this week as an inversion
in part of the U.S. yield curve raised a red flag for a
potential recession.  urn:newsml:reuters.com:*:nL1N1Y91ZV
    Data on Thursday also weighed on the greenback. The U.S.
trade deficit jumped to a 10-year high in October as soybean
exports dropped further and imports of consumer goods rose to a
record high, suggesting the Trump administration's
tariff-related measures to shrink the trade gap likely have been
ineffective. nL1N1Y91Q8]
    "The widening in the trade deficit to $55.5 billion in
October, from $54.6 billion, was mainly driven by a further
plunge in exports to China, and suggests that net trade will
once again be a drag on GDP growth in the fourth quarter,"
Andrew Hunter, a U.S. economist at Capital Economics, wrote in a
note.
    Separately, data showed private employers hired fewer
workers than expected in November, pointing to a moderation in
the pace of job growth.
    The dollar fell 0.8 percent against the Japanese yen after
news of the arrest in Canada of a top executive of Chinese tech
giant Huawei prompted fears of a flare-up in U.S.-China trade
tensions.  urn:newsml:reuters.com:*:nL1N1YA1YR
    The yen tends to benefit during geopolitical or financial
stress as Japan is the world's biggest creditor nation and there
is an assumption that Japanese investors will repatriate funds
should a crisis materialize.
    Sterling  GBP=  was 0.43 percent higher on the day even as
worry over how a British Parliament vote on Prime Minister
Theresa May's Brexit deal next week remained in focus.
 urn:newsml:reuters.com:*:nL4N1YB3P3
    The Canadian dollar fell against its U.S. counterpart to a
nearly 18-month low, as Bank of Canada Governor Stephen Poloz
said the economy was weaker than forecast and predicted low oil
prices would cut growth.  urn:newsml:reuters.com:*:nL4N1YB4DE

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Graphic: World FX rates in 2018    http://tmsnrt.rs/2egbfVh
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 (Reporting by Saqib Iqbal Ahmed; Editing by Dan Grebler)
 ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 646 223
6054; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))

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