September 20, 2017 / 9:26 PM / a year ago

FOREX-Dollar rises as Fed hints at December rate hike

    * Dollar index climbs to highest level in over two weeks
    * Fed sticks to view on three rate increases in 2017
    * As expected Fed to reduce $4.5 trillion balance sheet in
    * Mexican peso rebounds after losses tied to major

 (Updates market action, adds quotes)
    By Richard Leong
    NEW YORK, Sept 20 (Reuters) - The dollar rose broadly on
Wednesday, hitting a two-month high versus the yen, as the
Federal Reserve signaled it may raise interest rates for a third
time this year even as inflation has remained below its 2
percent goal. 
    The U.S. central bank also said after a two-day meeting it
will begin reduction of the Fed's $4.5 trillion balance sheet in
October by allowing small amounts of Treasuries and
mortgage-backed securities to run off.
    "Right now, the market sees the Fed more hawkish than
anticipated," said Tim Alt, director of currencies and rates at
Aviva Investors.
    Some traders had thought catastrophic damage from Hurricanes
Harvey and Irma in Texas and Florida might force the Fed to
postpone a rate increase until next year.
    The Fed raised rates by a quarter point in March and June
and its current target range is now at 1.00-1.25 percent.
    "The Fed didn't alter this time to the market's outlook.
This time the market adjusted to the Fed's outlook," said Brent
Schutte, chief investment strategist with Northwestern Mutual
Wealth Management Co.
    The futures market implied traders saw a 73 percent chance
of the Fed raising rates at its Dec. 12-13 meeting
, up from 52 percent before the Fed's latest policy
statement and forecast, CME Group's FedWatch tool showed.
    The dollar index, which tracks the greenback against six
major currencies, was modestly lower before turning higher on
the Fed's forecast for one more rate hike in 2017. It was up 0.7
percent for its biggest one-day increase since Aug. 4 at 92.426.
    The euro slid 0.8 percent to $1.1894, its lowest in
four sessions, while the greenback gained 0.5 percent to 112.17
yen after touching a two-month high at 112.51 yen,
Reuters data showed.
    Among emerging market currencies, the Mexican peso
recovered from Tuesday's losses spurred by the second deadly
earthquake to strike the country in two weeks.
    The Mexican currency ended up 0.2 percent at 17.76 peso per
dollar, reversing the prior day's 0.2 percent decline.
    The New Zealand dollar gained 0.6 percent to
$0.7360 after reaching its highest level in 6-1/2 weeks as one
poll showed the country's National Party pulled ahead of the
rival Labour Party ahead of a general election this weekend.    
    Support for the National Party jumped 6 points to 46
percent, according to the One News-Colmar Brunton opinion poll,
while support for the opposition Labour party slumped by seven
points to 37 percent.
    Currency bid prices at 5:05PM (2105 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1894        $1.1891     +0.03%         +13.14%     +1.1895     +1.1892
 Dollar/Yen       JPY=        112.2000       112.2100    -0.01%         -4.00%      +112.2500   +112.2100
 Euro/Yen         EURJPY=     133.44         133.43      +0.01%         +8.36%      +133.5000   +133.4500
 Dollar/Swiss     CHF=        0.9696         0.9697      -0.01%         -4.74%      +0.9698     +0.9700
 Sterling/Dollar  GBP=        1.3492         1.3492      +0.00%         +9.37%      +1.3495     +1.3494
 Dollar/Canadian  CAD=        1.2324         1.2319      +0.04%         -8.24%      +1.2328     +1.2323
 Australian/Doll  AUD=        0.8028         0.8031      -0.04%         +11.27%     +0.8031     +0.8029
 Euro/Swiss       EURCHF=     1.1535         1.1534      +0.01%         +7.63%      +1.1535     +1.1536
 Euro/Sterling    EURGBP=     0.8814         0.8813      +0.01%         +3.48%      +0.8816     +0.8813
 NZ               NZD=        0.7355         0.7355      +0.00%         +5.96%      +0.7358     +0.7358
 Dollar/Norway    NOK=        7.8609         7.8634      -0.03%         -8.99%      +7.8624     +7.8649
 Euro/Norway      EURNOK=     9.3500         9.3530      -0.03%         +2.91%      +9.3549     +9.3534
 Dollar/Sweden    SEK=        8.0108         8.0115      -0.04%         -12.04%     +8.0132     +8.0135
 Euro/Sweden      EURSEK=     9.5271         9.5306      -0.04%         -0.55%      +9.5333     +9.5309
All spots FX= 
Tokyo spots AFX= 
Europe spots EFX= 
Volatilities FXVOL= 
Tokyo Forex market info from BOJ TKYFX World central bank news
Economic Forecasts... ECON   Official rates...INT/RATE
Forex Diary.......MI/DIARY   Top events........M/DIARY
Diaries...........DIARY Diaries Index........IND/DIARY
Press Digests.....PRESS Polls on G7 economies..SURVEY/
European markets......MARKETS/))


 (Additional reporting by Abhinav Ramnarayan and Ritvik Carvalho
in London; Editing by Meredith Mazzilli and Chizu Nomiyama)
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