FOREX-Dollar extends losses as Fed minutes signal slower rate hikes

Reuters

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 (Updates prices)
    By Samuel Indyk
       LONDON, Nov 24 (Reuters) - The U.S. dollar extended
losses on Thursday after the minutes from the Federal Reserve's
November meeting supported the view that the central bank would
downshift and raise rates in smaller steps from its December
meeting.
    The eagerly awaited readout of the Nov. 1-2 meeting showed
officials were largely satisfied they could now move in smaller
steps, with a 50 basis point rate rise likely next month after
four consecutive 75 basis point increases.
    "The Fed will be happy to move rates by 50 basis points in
December and 25 basis points from the first meeting next year,"
said Niels Christensen, chief analyst at Nordea, noting that the
Fed will still feel it needs to do more to bring inflation down.
    "As long as the Fed see a stronger labour market, they don't
have a big concern about tightening," Christensen said. 
    The dollar index  =USD , which measures the greenback
against six major peers, was down 0.2% at 105.75, after sliding
1.1% on Wednesday.
    The Fed has taken interest rates to levels not seen since
2008 but slightly cooler-than-expected U.S. consumer price data
has stoked expectations of a more moderate pace of hikes. 
    Those hopes have seen the dollar index slide 5.2% in
November, putting it on track for its worst monthly performance
in 12 years.
    "There are not that many dollar buyers around these days
after the correction higher in euro-dollar in the first half of
November," Nordea's Christensen added. 
    The euro held onto gains after the account of the European
Central Bank's October meeting showed policymakers feared that
inflation may be getting entrenched, justifying their outlook
for further rate hikes. 
    The single currency  EUR=D3  was last up 0.2% at $1.0415,
while sterling  GBP=D3  was trading at $1.2135, up 0.7% on the
day. The pound rallied 1.4% on Wednesday after preliminary
British economic activity data beat expectations, although it
still showed that a contraction was under way.
    The euro weakened 0.4% against the Swedish krone  EURSEK= 
after Sweden's Riksbank raised rates by 75 basis points, in line
with expectations in a Reuters poll, but signalled additional
hikes would be needed to fight surging inflation. 
    The yuan  CNY=CFXS   CNY/  firmed after Chinese state media
quoted the cabinet as saying that Beijing will use timely cuts
in banks' reserve requirement ratio (RRR), alongside other
monetary policy tools, to keep liquidity reasonably ample.
    Meanwhile, billionaire investor Bill Ackman said he's
betting the Hong Kong dollar will fall and that its peg to the
U.S. dollar could break. 
    Since May, the Hong Kong dollar has been pinned near the
weaker end of its band, although it has lifted a bit in recent
weeks as markets start to price a peak in U.S. rates. It was
last at 7.8102 per dollar.  HKD=D3  
    The Japanese yen  JPY=EBS  was one of the strongest gainers
among major currencies, climbing 0.9% against the dollar to
138.285.
    U.S. markets will be closed on Thursday for Thanksgiving and
liquidity will likely be thinner than usual.
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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Samuel Indyk in London and Ankur Banerjee in
Singapore; Editing by Edwina Gibbs, Edmund Klamann and
Marguerita Choy)
 ((Samuel.Indyk@thomsonreuters.com))

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