CORRECTED-FOREX-Dollar at two-month peak against yen on Fed taper view

Tue Nov 12, 2013 6:28pm 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

    By Gertrude Chavez-Dreyfuss and Nick Olivari
    NEW YORK, Nov 12 (Reuters) - The dollar advanced to a
two-month high against the yen on Tuesday as investors bet the
Federal Reserve would begin trimming its stimulus program sooner
than 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. A reduction in the Fed's asset purchases is positive
for the U.S. currency because it means there would be fewer
dollars in the financial system.
    Atlanta Fed President Dennis Lockhart told reporters on
Tuesday that a tapering of the quantitative easing program
remains a possibility at the Dec. 17-18 policy meeting.
 
    "There has been a broad strengthening of the U.S. dollar
because of the December taper talk," said Greg Moore, currency
strategist at TD Securities in Toronto.
    Although 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.  
    The dollar was last up 0.6 percent at 99.70 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.
    The euro was up 0.2 percent at $1.3425 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 might get a lift from the central bank's
quarterly inflation report on Wednesday. Many in the market
expect the BoE to 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 0.6 percent at $1.5906. 
    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. 

 (Editing by Andre Grenon)
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