October 17, 2017 / 7:28 PM / in a year

FOREX-Dollar rises on talk of potential Fed chief nominee

    * Dollar bounces as Treasury yields hit nine-year highs
    * Yields up on report of Trump favoring potential policy
    * Trump seen selecting Fed chief nominee in early November

 (Updates market action, adds table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 17 (Reuters) - The dollar rose to a one-week
high against a basket of currencies on Tuesday on speculation
that U.S. President Donald Trump was leaning towards nominating
a Federal Reserve head who would be more inclined to raise
interest rates at a faster pace.  
    The greenback was also supported by U.S. two-year Treasury
yields hitting nine-year highs on Tuesday. Yields
climbed as well on growing expectations that Trump favored
Stanford economist John Taylor to head the U.S. central bank. 
    "Taylor is perceived as more hawkish than Ms.(Janet) Yellen
so under his potential tutelage, the central bank might lift
borrowing rates more aggressively, which would bolster the
dollar's allure," said Joe Manimbo, senior marker analyst, at
Western Union Business Solutions in Washington.
     The dollar index, which measures the greenback against a
basket of six major peers, hit a one-week high of 93.729.
    The index was last up 0.2 percent at 93.488.
    Interest rates futures implied traders saw a 93 percent
chance the Fed would raise rates in December, CME
Group's FedWatch program showed. 
    MUFG currency economist Lee Hardman, in London, said the
bank would "not be surprised" to see an initial jump in the
dollar of between 3 percent and 5 percent should Taylor be
    Bloomberg reported on Monday that Trump was impressed with
Taylor after meeting with him last week.  
    Trump's shortlist also includes Jerome Powell, a Fed
governor; Trump's top economic adviser Gary Cohn; Yellen, whose
term expires in February; and Kevin Warsh, a former Fed
governor, sources have said, though investors say the chances of
Warsh being selected have fallen.
    Trump is expected to announce his pick before going to Asia
in early November.
    Knocked by a stronger dollar, the euro slipped to a one-week
low of $1.1734, having fallen almost 3 percent since
hitting a 2-1/2-year high last month. The euro was last down 0.2
percent at $1.1770.
    The euro did not budge on German ZEW economic sentiment data
that fell short of forecast by coming at 17.6 points, below an
expected 20.1 points.
    Markets are wary of chasing the euro lower before a European
Central Bank policy meeting next week.
    Sterling dropped below $1.32 for the first time
since Thursday, after comments by Bank of England policymakers
were interpreted by markets as broadly dovish.
    Earlier on Tuesday, official data showed Britain's inflation
rate hit 3 percent, above the BoE's 2 percent target but in line
with expectations.
    Currency bid prices at 3:07PM (1907 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1770        $1.1795     -0.21%         +11.96%     +1.1800     +1.1737
 Dollar/Yen       JPY=        112.2000       112.1800    +0.02%         -4.00%      +112.4700   +112.0400
 Euro/Yen         EURJPY=     132.07         132.32      -0.19%         +7.25%      +132.3600   +131.8400
 Dollar/Swiss     CHF=        0.9779         0.9753      +0.27%         -3.92%      +0.9809     +0.9749
 Sterling/Dollar  GBP=        1.3185         1.3248      -0.48%         +6.88%      +1.3287     +1.3156
 Dollar/Canadian  CAD=        1.2528         1.2516      +0.10%         -6.72%      +1.2590     +1.2513
 Australian/Doll  AUD=        0.7846         0.7850      -0.05%         +8.75%      +0.7860     +0.7819
 Euro/Swiss       EURCHF=     1.1513         1.1505      +0.07%         +7.43%      +1.1527     +1.1485
 Euro/Sterling    EURGBP=     0.8926         0.8901      +0.28%         +4.79%      +0.8929     +0.8858
 NZ               NZD=        0.7168         0.7170      -0.03%         +3.27%      +0.7200     +0.7148
 Dollar/Norway    NOK=        7.9358         7.8964      +0.50%         -8.12%      +7.9614     +7.8951
 Euro/Norway      EURNOK=     9.3416         9.3174      +0.26%         +2.82%      +9.3533     +9.3163
 Dollar/Sweden    SEK=        8.1429         8.1036      +0.27%         -10.59%     +8.1755     +8.1018
 Euro/Sweden      EURSEK=     9.5853         9.5593      +0.27%         +0.06%      +9.5995     +9.5574

 (Reporting by Gertrude Chavez-Dreyfuss and Richard Leong in New
York; Additional reporting Fanny Potkin in London; Editing by
Susan Thomas and Meredith Mazzilli)
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