December 19, 2018 / 3:44 PM / 6 months ago

REFILE-FOREX-Dollar slides as investors brace for cautious Fed

 (Adds name of analyst Mark McCormick's company TD Securities in 6th paragraph)
    * Currency markets edgy before Fed, policy outlook
    * Yen, Swiss franc firm on safety bid
    * Euro at one-week high, yen hits 7-week peak vs dollar
    * Graphic: World FX rates in 2018

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 19 (Reuters) - The dollar fell across the board on Wednesday, as investors bet the
Federal Reserve would signal a slower pace of interest rate hikes next year as it grapples with financial
market volatility and potential slowdowns in major economies around the world.
    The greenback dropped to a seven-week low against the yen and a roughly one-week trough versus the
    The Fed ends its two-day meeting later on Wednesday and is widely expected to raise rates for a fourth
time this year but express caution about future monetary tightening due to concerns about slowing global
    Expectations of a pause from the Fed amid a U.S.-China trade war and global financial market
volatility has led some investors to question if the dollar's stellar run will continue into 2019.
    U.S. President Donald Trump has berated the Fed repeatedly and on Tuesday said in a tweet it was
"incredible" for the central bank to even consider tightening given global economic uncertainties.
    "We expect the Fed to hike and yet the FX reaction probably hinges on the dots and tone," said Mark
McCormick, North American head of FX strategy, at TD Securities in Toronto.
    Fed officials' median projection on the number of rate increases is commonly referred to as its
    "For the U.S. dollar, we think the most likely path leans lower, notwithstanding the fact that a Fed
pause is priced in. Notably, markets are witnessing, in real time, a narrative shift rather than just a
repricing of the Fed's trajectory," he added.
    According to the CME Group's FedWatch tool, the probability of a December rate hike is 69 percent,
down from around 75 percent last week, a significant move in such a short period.
    The safe-haven yen and the Swiss franc both strengthened as Tuesday's plunge in oil prices provided a
stark reminder of dimming prospects for the global economy. U.S. crude futures recovered on
Wednesday, but were still in a downtrend since October.
    Risk sentiment has been soured by weaker-than-expected economic data out of China and the eurozone.
    In mid-morning trading, the dollar was down 0.3 percent against the yen at 112.25 yen, while
the euro rose 0.6 percent versus the greenback to $1.1426.
    The euro was also supported by news that Italy had struck a deal with the European Commission over its
contested 2019 budget, signalling an end to weeks of wrangling that had shaken financial markets.
    The dollar also slipped against the Swiss franc, down 0.1 percent at 0.9910 franc.
    The U.S. currency's losses pushed its index 0.5 percent lower at 96.612.
    Currency bid prices at 10:13 AM (1513 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1428        $1.1361     +0.59%         -4.74%      +1.1432     +1.1361
 Dollar/Yen       JPY=        112.2100       112.5100    -0.27%         -0.41%      +112.6000   +112.1400
 Euro/Yen         EURJPY=     128.23         127.82      +0.32%         -5.13%      +128.2900   +127.7200
 Dollar/Swiss     CHF=        0.9913         0.9925      -0.12%         +1.72%      +0.9942     +0.9910
 Sterling/Dollar  GBP=        1.2662         1.2644      +0.14%         -6.29%      +1.2678     +1.2608
 Dollar/Canadian  CAD=        1.3428         1.3463      -0.26%         +6.77%      +1.3482     +1.3427
 Australian/Doll  AUD=        0.7188         0.7180      +0.11%         -7.85%      +0.7200     +0.7178
 Euro/Swiss       EURCHF=     1.1328         1.1280      +0.43%         -3.09%      +1.1334     +1.1278
 Euro/Sterling    EURGBP=     0.9023         0.8984      +0.43%         +1.58%      +0.9041     +0.8981
 NZ               NZD=        0.6863         0.6845      +0.26%         -3.15%      +0.6870     +0.6846
 Dollar/Norway    NOK=        8.6701         8.7287      -0.67%         +5.64%      +8.7341     +8.6699
 Euro/Norway      EURNOK=     9.9102         9.9201      -0.10%         +0.60%      +9.9409     +9.8912
 Dollar/Sweden    SEK=        9.0422         9.0685      +0.27%         +10.25%     +9.0739     +9.0394
 Euro/Sweden      EURSEK=     10.3330        10.3050     +0.27%         +5.02%      +10.3462    +10.2949
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Tom Finn in London
Editing by Phil Berlowitz)
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