December 17, 2018 / 3:39 PM / 6 months ago

FOREX-Dollar slides ahead of Fed rate decision on Wednesday

    * Euro recovers from last week's weakness, up 0.4 pct
    * Dollar falls from 18-month high before two-day Fed meeting
    * FX markets generally quiet ahead of key policy events
    * 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 17 (Reuters) - The dollar on Monday fell from
an 18-month high reached the previous session, ahead of the
Federal Reserve's policy meeting this week that will likely
result in an increase in interest rates but signal a more
cautious tone for the economy next year.
    The Fed ends its two-day policy meeting on Wednesday and is
expected to tighten for a fourth time in 2018. All eyes,
however, will be on signals about the pace of further tightening
and the Fed's sense of how the economy is holding up amid a
U.S.-China trade conflict and global financial market
volatility.
    "Investors are increasingly convinced the Fed will begin
putting the conditions in place for a pause in the rate hike
cycle," said Karl Schamotta, chief market strategist at
Cambridge FX in Toronto.
    Last week, the dollar enjoyed its best weekly performance
since September, reaching an 18-month high on Friday. The euro,
on the other hand, weakened last week after the European Central
Bank cut inflation and growth forecasts and struck a cautious
tone about the outlook for the world economy.
    In mid-morning trading, the dollar index, which measures the
greenback's value against a basket of other major currencies,
slipped 0.3 percent to 97.177.
   A bearishness in the dollar has started to emerge in 
speculative market positioning, in which short-term investors
cut net long bets on the dollar last week from a near two-year
high, according to Commodity Futures Trading Commission data.

    The euro, meanwhile, rose 0.3 percent on Monday, to as high
as $1.1353 even though EU statistics office Eurostat earlier
lowered November's inflation reading. The euro fell
as low as $1.1266 last week.
    Weaker-than-expected economic data from China and Europe
last week sent investors toward the perceived safety of the
dollar.
    "We continue to expect that euro/dollar will remain range
bound but the euro will underperform on crosses in the near
term," Goldman Sachs analysts wrote in a note to clients, citing
the ECB's downbeat assessment and signs that street protests in
France were beginning to weigh on business sentiment.
    The offshore Chinese yuan, which has fallen
significantly in 2018, was little changed at 6.8988. 
    Investors are now looking to a major speech by President Xi
Jinping on Tuesday to mark the 40th anniversary of China's
market reforms and opening up. China is also scheduled to hold
its annual Central Economic Work Conference this week.

    The dollar fell 0.4 percent versus the yen to 112.94,
while sterling strengthened 0.2 percent to $1.2606,
buoyed by the dollar's move downward.
    
    ========================================================
    Currency bid prices at 10:16AM (1516 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1341        $1.1307     +0.30%         -5.46%      +1.1353     +1.1300
 Dollar/Yen       JPY=        112.9500       113.3700    -0.37%         +0.25%      +113.5200   +112.8800
 Euro/Yen         EURJPY=     128.09         128.16      -0.05%         -5.24%      +128.5800   +128.0000
 Dollar/Swiss     CHF=        0.9925         0.9976      -0.51%         +1.87%      +0.9985     +0.9918
 Sterling/Dollar  GBP=        1.2611         1.2583      +0.22%         -6.67%      +1.2646     +1.2571
 Dollar/Canadian  CAD=        1.3395         1.3382      +0.10%         +6.50%      +1.3407     +1.3373
 Australian/Doll  AUD=        0.7183         0.7176      +0.10%         -7.92%      +0.7186     +0.7169
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1257         1.1280      -0.20%         -3.70%      +1.1291     +1.1249
 Euro/Sterling    EURGBP=     0.8989         0.8982      +0.08%         +1.19%      +0.9004     +0.8968
 NZ               NZD=        0.6808         0.6795      +0.19%         -3.97%      +0.6817     +0.6784
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.6358         8.6133      +0.26%         +5.22%      +8.6454     +8.6044
 Euro/Norway      EURNOK=     9.7942         9.7403      +0.55%         -0.55%      +9.8002     +9.7365
 Dollar/Sweden    SEK=        9.0607         9.0587      +0.33%         +10.47%     +9.0874     +9.0371
 Euro/Sweden      EURSEK=     10.2780        10.2440     +0.33%         +4.44%      +10.2916    +10.2410
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Tommy Wilkes in London)
  
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