January 31, 2019 / 9:03 PM / 3 months ago

FOREX-Dollar slides vs yen on U.S. rate outlook; euro falls

    * Euro falls after ECB's Weidmann's comments on Germany 
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds comments, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 31 (Reuters) - The dollar fell to two-week
lows against the yen on Thursday, pressured by the Federal
Reserve's cautious outlook on the U.S. economy, which suggested
that the central bank is near the end of its tightening cycle.
    The euro slid from three-week highs against the dollar after
Jens Weidmann, the Bundesbank president and a member of the
European Central Bank Governing Council, painted a bleak picture
of the German economy, saying the country's slump will last
longer than initially thought.
    In the United States, the Fed's dovish stance in its policy
statement on Wednesday after the close of a two-day meeting took
the market by surprise even though the Fed has been preaching
patience and balance sheet flexibility for some time. Analysts
said the statement seemed as if the Fed did a turnaround from
its previous generally upbeat economic stance.
    Over the last two months, the dollar index, which
tracks the greenback versus six major rivals, has fallen around
1.7 percent, its worst two-month performance in a year.
    On Wednesday, the Fed said it would be patient in raising
interest rates further this year as it pointed to growing
uncertainty about the U.S. economic outlook. It did not rule out
using a range of tools, including altering the size and
composition of its balance sheet, as well as rate cuts, if the
economy warranted it.
    Following the Fed statement, TD Securities has now changed
its Fed forecast, TD's senior FX strategist, Mazen Issa, said.
It expects the Fed to hike just one more time, instead of twice,
and this would be the last for this cycle.
    The market is now looking to Friday's U.S. non-farm payrolls
report for January, with economists surveyed by Reuters
forecasting job gains of 165,000, down from 312,000 in December.
    "Given the renewed weakness for the dollar, if the jobs and
wages data were to disappoint expectations badly then this will
further reinforce the Fed's cautious outlook on the economy and
reduce the possibility of rate increases even further," said
Fawad Razaqzada, market analyst at Forex.com in London.
    In afternoon trading, the dollar fell 0.2 percent against
the yen to 108.81 after earlier falling to a two-week low
of 108.51.
    The euro was down 0.3 percent against the dollar at $1.1439
, pressured by comments from the Bundesbank's Weidmann.
    Weidmann also said the euro zone is likely to undershoot its
inflation projection this year due to lower oil prices and the
ECB should look through this dip and not waste time
unnecessarily in normalizing policy.
    Lee Hardman, strategist at MUFG, said the euro was sold off
on the back of Weidmann's comments, which became more
significant given he is one of the more hawkish members of the
ECB board.
    Amid the euro's losses, the dollar index rose 0.3 percent to
95.591, recovering from a three-week low.
    
    ========================================================
    Currency bid prices at 3:38PM (2038 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1442        $1.1477     -0.30%         -0.23%      +1.1515     +1.1435
 Dollar/Yen       JPY=        108.8400       109.0200    -0.17%         -1.29%      +109.0700   +108.5100
 Euro/Yen         EURJPY=     124.55         125.15      -0.48%         -1.32%      +125.2900   +124.5000
 Dollar/Swiss     CHF=        0.9944         0.9941      +0.03%         +1.32%      +0.9952     +0.9908
 Sterling/Dollar  GBP=        1.3110         1.3116      -0.05%         +2.77%      +1.3160     +1.3099
 Dollar/Canadian  CAD=        1.3135         1.3147      -0.09%         -3.68%      +1.3165     +1.3120
 Australian/Doll  AUD=        0.7265         0.7246      +0.26%         +3.06%      +0.7295     +0.7243
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1378         1.1412      -0.30%         +1.10%      +1.1429     +1.1373
 Euro/Sterling    EURGBP=     0.8727         0.8749      -0.25%         -2.86%      +0.8767     +0.8712
 NZ               NZD=        0.6908         0.6891      +0.25%         +2.84%      +0.6938     +0.6889
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.4327         8.4238      +0.11%         -2.38%      +8.4450     +8.4005
 Euro/Norway      EURNOK=     9.6520         9.6715      -0.20%         -2.56%      +9.6817     +9.6486
 Dollar/Sweden    SEK=        9.0487         9.0432      -0.24%         +0.95%      +9.0578     +9.0117
 Euro/Sweden      EURSEK=     10.3565        10.3818     -0.24%         +0.90%      +10.3865    +10.3497
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler
and Leslie Adler)
  
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