* Fed's Dudley confident rising wages would boost U.S. inflation
* Yen drifts lower as BOJ downplays reduction of stimulus
* Sterling slips in advance of Brexit negotiations start
(Updates market action, changes dateline, previous LONDON)
By Richard Leong
NEW YORK, June 19 The dollar nudged higher on Monday as an influential U.S.
Federal Reserve official expressed confidence rising wages would help revive domestic inflation
which has shown signs of softening recently.
The yen weakened against the greenback and euro following Friday's Bank of Japan meeting
where officials downplayed the likelihood it would begin to roll back emergency stimulus for the
On Monday, New York Fed President William Dudley's comments came with doubts whether
stubbornly low inflation, which has been stuck below the central bank's 2-percent goal, would
allow policy-makers to raise rates further the rest of the year.
"The Fed doesn't seem to be too concerned about the recent pullback in the inflation data.
They are committed to policy normalization," said Eric Viloria, currency strategist at Wells
Fargo Securities in New York.
The Fed, as expected, raised key overnight borrowing costs by a quarter point last Wednesday
and left the door open for another rate increase later this year. It also provided more details
on its plan to reduce its bond purchases in a bid to shrink its $4.5 trillion balance sheet.
"Inflation is a little lower than what we would like, but we think that if the labor market
continues to tighten, wages will gradually pick up and with that, inflation will gradually get
back to 2 percent," Dudley told a local business group in Plattsburg, New York.
Traders raised their outlook on a rate hike by the Fed's Dec. 12-13 policy meeting to 45
percent from 41 percent late on Friday, CME Group's FedWatch tool showed.
An index, which gauges the dollar against six other currencies, was up 0.15 percent
The euro was down 0.2 percent versus the greenback to $1.1174, while the dollar
gained 0.4 percent against the yen at 111.32 yen.
The single currency was up 0.2 percent at 124.39 yen,
Positioning data showed speculators' net bullish bets on the euro reached their highest in
seven years last week.
There was no discernible boost for the single currency from French President Emmanuel
Macron's landslide in parliamentary elections on Sunday.
Sterling was 0.1 percent lower at $1.2761 higher ahead of the formal start of
negotiations on Britain's planned exit from the European Union.
Speculation that a surprise election result earlier in June could generate a drift towards a
"soft Brexit" has given the pound some support, although many analysts expect newsflow from the
talks to hurt it.
Currency bid prices at 10:40AM (1440 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct
Euro/Dollar EUR= $1.1172 $1.1197 -0.22% +6.27%
Dollar/Yen JPY= 111.3200 110.8400 +0.43% -4.75%
Euro/Yen EURJPY= 124.38 124.12 +0.21% +1.01%
Dollar/Swiss CHF= 0.9734 0.9736 -0.02% -4.36%
Sterling/Dollar GBP= 1.2759 1.2774 -0.12% +3.43%
Dollar/Canadian CAD= 1.3207 1.3210 -0.02% -1.66%
Australian/Doll AUD= 0.7605 0.7616 -0.14% +5.41%
Euro/Swiss EURCHF= 1.0877 1.0898 -0.19% +1.49%
Euro/Sterling EURGBP= 0.8754 0.8755 -0.01% +0.00%
NZ NZD= 0.7243 0.7248 -0.07% +4.35%
Dollar/Norway NOK= 8.4494 8.4451 +0.05% -2.17%
Euro/Norway EURNOK= 9.4423 9.4588 -0.17% +3.92%
Dollar/Sweden SEK= 8.7272 8.7067 +0.04% +0.00%
Euro/Sweden EURSEK= 9.7506 9.7471 +0.04% +1.78%
(Additional reporting by Patrick Graham in LONDON, Masayuki Kitano in SINGAPORE and Shinichi
Saoshiro in TOKYO; Editing by Marguerita Choy and Ed Osmond)