FOREX-Dollar headed for weekly loss as investors brace for slower Fed hikes

Reuters

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    By Rae Wee
       SINGAPORE, Nov 25 (Reuters) - The dollar stood close to
a three-month low and was on track for a weekly loss on Friday,
as the prospect of the Federal Reserve slowing monetary policy
tightening as soon as December dominated investors' minds and
kept the mood buoyant.
    Trading was thin overnight due to the Thanksgiving holiday
in the United States, though most currencies extended their
gains against a softer greenback before paring them slightly in
early Asia trade.
    Sterling  GBP=D3  rose more than 0.5% overnight and last
stood at $1.21125, close to its over three-month high of $1.2153
hit in the previous session and on track for a nearly 2% weekly
gain.
    The Japanese yen  JPY=EBS  jumped roughly 0.7% overnight,
and last bought 138.60 per dollar.
    Minutes from the Fed's November meeting released earlier
this week showed that a "substantial majority" of policymakers
agreed it would "likely soon be appropriate" to slow the pace of
interest rate hikes -- remarks that sent the greenback tumbling.
    The Fed's aggressive interest rate hikes and market
expectations of how high the central bank could take them has
been a huge driver of the dollar's  =USD  10% surge this year.
        "We've still got the third successive day of positive
risk sentiment... I think that is keeping the U.S. dollar
subdued pretty much across the board," said Ray Attrill, head of
FX strategy at National Australia Bank.
    Against a basket of currencies, the U.S. dollar index  =USD 
stood at 105.94, testing its three-month trough of 105.30 hit
last week. It was headed for a weekly loss of nearly 1%.
    Also aiding risk sentiment slightly was a survey that showed
that German business morale rose further than expected in
November.
    European Central Bank (ECB) policymakers fear that inflation
may be getting entrenched in the euro zone, accounts of its
October meeting showed overnight. However, markets are now
expecting a more modest, 50 bp move at the December meeting.
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       The euro  EUR=EBS  was 0.06% lower at $1.04045, but
remained close to $1.0481, its highest level in over four months
hit last week.
    "We have the euro zone inflation numbers next week, so I
think they are going to be a big test of market pricing ... were
we to get another upside surprise on that, then I think that
would bring 75 bp back on the agenda," said Attrill.
    The Aussie  AUD=D3  fell 0.17% to $0.6753, after rising more
than 0.4% overnight. The kiwi  NZD=D3  slid 0.19% to $0.6252,
but that was not far off its three-month peak hit in the
previous session.
    The New Zealand dollar was headed for a weekly gain of more
than 1.5%, aided by the Reserve Bank of New Zealand's 75 bp rate
hike earlier in the week and its hawkish rate outlook.
 urn:newsml:reuters.com:*:nL1N32I2JS urn:newsml:reuters.com:*:nL1N32J29J
    Over in China, markets were also closely watching an
impending cut in banks' reserve requirement ratio (RRR).
    China will use timely cuts in banks' RRR, alongside other
monetary policy tools, to keep liquidity reasonably ample, state
media quoted a cabinet meeting as saying.
    "We believe it's likely the PBoC (People's Bank of China)
may cut RRR by 25 bp for most banks in the next couple of weeks
(or even days)," said analysts at Nomura.
    "That being said, the RRR is likely to only have a limited
positive impact, as we believe the real hurdle for the economy
lies in local officials' more zealous implementation of Covid
restrictions rather than insufficient loanable funds."
    The Chinese offshore yuan  CNH=D3  was last 0.1% lower at
7.1759 per dollar.
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 (Reporting by Rae Wee; Editing by Ana Nicolaci da Costa)
 ((Rae.Wee@thomsonreuters.com;))

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