December 20, 2018 / 3:39 PM / 6 months ago

FOREX-Dollar tumbles to 1-month low on U.S. rate outlook, growth concerns

    * Dollar on pace to post daily largest loss in 6 weeks
    * Sweden's central bank raises rates, boosts krona
    * U.S. repatriation flows slow, pressures dollar
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Adds comment, FX table, updates prices, changes byline,
dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 20 (Reuters) - The dollar fell to a one-month
low 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, lessening the appeal of
dollar-denominated assets.
    Investors also expressed concern that policymakers may be
raising interest rates just as the U.S. economy faces a
slowdown.
    Aside from lowering interest rate forecasts, the Fed also
reduced growth and inflation expectations next year.
    Sweden's currency, meanwhile, led gainers with the krona
 jumping 0.9 percent against the dollar on Thursday 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 10 basis points and just a shade above a 11-year
low set earlier this month with an inversion widely considered
as a harbinger of recession.
    "It appears that markets are perhaps now starting to focus
on some of the more dovish aspects of the Fed's announcement,"
said Nick Bennenbroek, currency strategist, at Wells Fargo
Securities in New York.
    "While the Swedish central bank's surprise rate hike, at
least in terms of timing, was a reminder that in addition to
slower Fed tightening, next year may also see more active global
central bank tightening," he added.
    In mid-morning trading, the dollar fell 0.6 percent
against its rivals to 96.471, after earlier dropping to 96.258,
its lowest in a month. On a daily basis, it is set for the
biggest percentage drop in six weeks.
    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.

    SWEDISH CROWN SHINES
    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 0.6 percent to
$1.1440 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 yen advanced against the dollar, which fell 0.8
percent to 111.60. In a widely expected decision, the Bank of
Japan kept rates steady, maintaining its ultra-loose monetary
settings.
    While the Fed raised interest rates by a quarter point,
China's central bank rolled out a policy tool to spur lending to
small and private companies in a move that some analysts termed
as equivalent to a targeted rate cut.
    
    ========================================================
    Currency bid prices at 10:14AM (1514 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1440        $1.1375     +0.57%         -4.63%      +1.1485     +1.1372
 Dollar/Yen       JPY=        111.5800       112.4700    -0.79%         -0.96%      +112.6000   +111.4800
 Euro/Yen         EURJPY=     127.67         127.95      -0.22%         -5.56%      +128.3700   +127.4700
 Dollar/Swiss     CHF=        0.9911         0.9944      -0.33%         +1.72%      +0.9954     +0.9866
 Sterling/Dollar  GBP=        1.2650         1.2607      +0.34%         -6.38%      +1.2706     +1.2610
 Dollar/Canadian  CAD=        1.3472         1.3483      -0.08%         +7.12%      +1.3504     +1.3446
 Australian/Doll  AUD=        0.7128         0.7107      +0.30%         -8.63%      +0.7148     +0.7087
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1339         1.1313      +0.23%         -2.99%      +1.1349     +1.1308
 Euro/Sterling    EURGBP=     0.9041         0.9019      +0.24%         +1.79%      +0.9050     +0.9008
 NZ               NZD=        0.6777         0.6763      +0.21%         -4.36%      +0.6790     +0.6726
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.6572         8.7174      -0.69%         +5.49%      +8.7300     +8.6113
 Euro/Norway      EURNOK=     9.9066         9.9219      -0.15%         +0.59%      +9.9481     +9.8810
 Dollar/Sweden    SEK=        8.9641         9.0951      -0.87%         +9.30%      +9.0997     +8.9269
 Euro/Sweden      EURSEK=     10.2575        10.3480     -0.87%         +4.26%      +10.3690    +10.2400
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Saikat Chatterjee in London)
  
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