December 20, 2018 / 8:31 PM / 2 years ago

FOREX-Dollar sinks to 3-month low vs yen on U.S. rate outlook, growth fears

    * Dollar index falls to one-month low
    * Sweden's central bank raises rates, boosts crown
    * U.S. repatriation flows slow, pressures dollar
    * Graphic: World FX rates in 2018

 (Recasts first paragraph, adds comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 20 (Reuters) - The dollar fell to a more than
three-month low against the yen on Thursday, after the Federal
Reserve signaled fewer interest rate hikes over the next two
years and expressed caution about the U.S. economic outlook.
    The dollar index, a measure of the greenback's value against
six major currencies, dropped to a one-month low. 
    Diminished U.S. rate hike expectations lessen the appeal of
dollar-denominated assets.
    Aside from lowering interest rate forecasts, the Fed also
reduced growth and inflation expectations next year.
    The Swedish crown, meanwhile, was one of the biggest
gainers on Thursday, up 0.6 percent against the dollar after its
central bank raised interest rates for the first time in more
than seven years. 
    In the United States, the two-year/10-year note yield curve
- widely considered an indicator of future recessions -
flattened to 9 basis points. An inversion of this curve is
widely considered a harbinger of recession.
    "We think market sentiment will not improve amid a more
cautious Fed," said Mazen Issa, senior FX strategist, at TD
Securities in New York. "Unresolved trade disputes and an
increasingly toxic U.S. political climate suggest further risk
reduction is likely."
    As result, Issa noted that the safe-haven yen will lead G10
currencies in gains against the U.S. dollar.
    The dollar on Thursday fell to 110.82 yen against the
dollar, its lowest since early September, declining for a fifth
straight session. It was last down 1.4 percent at 111.13 yen.
    In a widely-expected decision, the Bank of Japan on Thursday
kept rates steady, maintaining its ultra-loose monetary
    The dollar also slid 0.8 percent against its rivals
to 96.263, after earlier dropping to 96.042, its lowest in a
month. The index posted its largest daily percentage drop in six
    Diminishing repatriation flows have also dampened the
dollar's outlook. They peaked at nearly $300 billion in the
first quarter of 2018, but shrank more than two-thirds to $93
billion in the September quarter, according to latest U.S. data.

    A rate hike by Sweden's Riksbank was not a consensus view in
the foreign exchange markets, with a Reuters poll showing
two-thirds of analysts expecting the Riksbank to keep rates
unchanged. The remainder predicted a tightening.
    In other currency pairs, the euro rose 0.8 percent to
$1.1466 building on gains on Wednesday on news that Italy
had struck a deal with the European Commission over its
contested 2019 budget and some solid trade data this week.

    The euro earlier rose to a six-week high versus the dollar. 
    Currency bid prices at 3:06PM (2006 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1466        $1.1375     +0.80%         -4.42%      +1.1485     +1.1372
 Dollar/Yen       JPY=        111.1200       112.4700    -1.20%         -1.38%      +112.6000   +110.8200
 Euro/Yen         EURJPY=     127.45         127.95      -0.39%         -5.72%      +128.3700   +127.2300
 Dollar/Swiss     CHF=        0.9870         0.9944      -0.74%         +1.30%      +0.9954     +0.9841
 Sterling/Dollar  GBP=        1.2665         1.2607      +0.46%         -6.27%      +1.2706     +1.2610
 Dollar/Canadian  CAD=        1.3494         1.3483      +0.08%         +7.29%      +1.3530     +1.3446
 Australian/Doll  AUD=        0.7116         0.7107      +0.13%         -8.78%      +0.7148     +0.7087
 Euro/Swiss       EURCHF=     1.1315         1.1313      +0.02%         -3.20%      +1.1349     +1.1299
 Euro/Sterling    EURGBP=     0.9052         0.9019      +0.37%         +1.90%      +0.9055     +0.9008
 NZ               NZD=        0.6774         0.6763      +0.16%         -4.40%      +0.6790     +0.6726
 Dollar/Norway    NOK=        8.6723         8.7174      -0.52%         +5.67%      +8.7300     +8.6113
 Euro/Norway      EURNOK=     9.9457         9.9219      +0.24%         +0.99%      +9.9588     +9.8810
 Dollar/Sweden    SEK=        8.9706         9.0951      -0.56%         +9.37%      +9.0997     +8.9269
 Euro/Sweden      EURSEK=     10.2897        10.3480     -0.56%         +4.57%      +10.3690    +10.2400
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve
Orlofsky and Chizu Nomiyama)
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