CORRECTED-FOREX-Dollar rallies to two-month peak vs yen, near 100 yen

Tue Nov 12, 2013 6:27pm EST

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(In headline and first sentence, corrects to show that dollar
hit two-month peak vs yen, not a one-month peak)
    * Dollar/yen nears 100 yen on Fed tapering expectations
    * Sterling hits 2-month low vs dollar on UK inflation data

    NEW YORK, Nov 12 (Reuters) - The dollar climbed to a
two-month peak against the yen on Tuesday as investors bet the
Federal Reserve will begin trimming stimulus sooner than
previously anticipated. 
    Speculation has grown that the Fed will start to reduce its
$85 billion-a-month bond-buying program sooner rather than later
after last Friday's release of better-than-expected U.S. jobs
numbers. 
    The Fed stimulus program has flooded the world with cheap
dollars and expectations it will scale it back earlier than
anticipated tend to boost the dollar. 
    Though investors were disappointed when the Fed did not
begin to slow the program in September and pushed out tapering
expectations until as far as April, they are now seeing data,
such as the nonfarm payrolls report, that could lead the Fed to 
 reduce accommodation in December.  
    "There is a stronger case for a December taper after
Friday's payrolls report," said Omer Esiner, chief market
analyst at Commonwealth Foreign Exchange in Washington D.C.
"While the underlying metrics of the jobs numbers are not as
strong as the headline suggested, the 200,000 plus addition to
payrolls in October combined with potentially strong economic
reports in coming weeks could further bolster hope of a move by
the Fed in December."     
    The dollar was last up 0.5 percent to 99.67 yen, with
the peak of 99.79 yen its strongest since Sept. 13. 
    The dollar faces resistance at 100 yen and at the September
peak of 100.62 yen.
    "Better-than-expected U.S. payrolls last week and also the
outlook for easier monetary policy in Europe is helping the
dollar," said Niels Christensen, currency strategist at Nordea
in London.
    The euro was up 0.2 percent at $1.3429 after rising
to a three-day high. The single currency was well above the
two-month low of $1.3295 hit on Thursday when it sold off
sharply after the European Central Bank's unexpected interest
rate cut.
    The dollar index rose 0.1 percent to 81.161, edging
back toward a two-month peak of 81.482 struck on Friday.
    
    POUND DIPS
    Sterling slid to a two-month low against the dollar of
$1.5852 after UK inflation for October fell more than
expected.  
    However, the pound may get a lift from the central bank's
quarterly inflation report on Wednesday. Many in the market
expect the BoE will bring forward the point at which it sees UK
unemployment hitting 7 percent, the level at which it has said
it would consider raising rates. 
    Sterling was last down 0.4 percent at $1.5919. 
    Scandinavian currencies were among the biggest losers, with
the Swedish crown touching a 17-month low against the
euro after weak Swedish inflation data prompted talk of a rate
cut. 
    "The CPI print from Sweden was the 'nail in the coffin' for
getting a rate cut. Given that the market is not fully priced
for a cut there is some more room for the Swedish crown to
fall," said Carl Hammer, chief currency strategist at SEB in
Stockholm. 
    He said SEB had changed their forecasts after the data and
now expected an easing of official borrowing costs in December,
adding that the Swedish crown could fall to 9 or 9.10 crowns per
euro.
    The Norwegian crown also hit its lowest in nearly four years
against the euro on expectations the Norwegian Central
Bank would follow the European Central Bank and cut rates next
year. 

 (Reporting By Nick Olivari; Editing by Chris Reese)
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