August 27, 2018 / 3:59 PM / 3 months ago

FOREX-Dollar weakens on rate outlook; Mexican peso surges on trade deal

    * Fed tightening cycle nearing end -analyst
    * Mexican peso rises as U.S. reaches trade deal with Mexico 
    * Turkish lira slides 2.2 percent as markets reopen
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Adds U.S.-Mexico deal, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 27 (Reuters) - The dollar fell on Monday, hurt
by comments from Federal Reserve Chairman Jerome Powell on
Friday that seemed to suggest a slower pace of monetary
tightening and as the currency's safe-haven appeal eased after
the United States and Mexico reached a trade deal.
    The two sides agreed to replace the North American Free
Trade Agreement, or NAFTA, and talks with Canada were expected
to begin immediately in hopes of reaching a final agreement by
Friday, a senior U.S. trade official said.
    That pushed the Mexican peso and Canadian dollar
 higher against the greenback, up 1.3 percent and 0.3
percent respectively, and boosted risk appetite across financial
markets.
    At a symposium in Jackson Hole, Wyoming, Powell emphasized
the central bank's push to raise interest rates despite
President Donald Trump's criticism of higher borrowing costs.
But he also said the Fed sees no clear sign of inflation
accelerating above 2 percent.
    His comments did little to change market expectations for
rate hikes in September and December and disappointed some
dollar bulls hoping for a more hawkish message.
    Since hitting a more than one-year high in mid-August, the
dollar has fallen more than 2 percent amid remarks from Trump
criticizing the Fed for raising interest rates at a time when
the government was trying to stimulate the economy.
    "The takeaway from Jackson Hole is that the Fed may not look
to tighten much more than is currently priced into markets,"
said Mark McCormick, North American head of FX strategy at TD
Securities in Toronto. 
    "It is clear the Fed cycle is close to nearing the
end-game," he added.
    Interest rate hike expectations have supported the dollar
this year as the U.S. economy tracked a stable growth path.
    The Treasury yield curve on Monday reached its
flattest since 2007 - a factor seen as reducing support for the
dollar - in the wake of Powell's speech.
    In midday trading, the dollar index, which measures the
greenback against a basket of six major currencies, was
down 0.2 percent at 94.97 after slipping more than 0.5 percent
in the previous session.
    The euro rose 0.2 percent to $1.1647 after climbing
as high as $1.1654, its strongest since Aug. 2. The currency
advanced more than 0.7 percent on Friday.
    Overall, financial markets showed a healthier appetite for
risk as U.S. stocks rose, curbing the dollar's safe-haven
appeal.
    In emerging markets, the Turkish lira weakened more than 2
percent against the dollar on Monday after a week-long holiday,
hit by persisting concern about a diplomatic rift with
Washington over a detained U.S. pastor.
    
    ========================================================
    Currency bid prices at 11:43AM (1543 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1671        $1.1621     +0.43%         -2.71%      +1.1680     +1.1594
 Dollar/Yen       JPY=        111.0300       111.2200    -0.17%         -1.46%      +111.3600   +110.9400
 Euro/Yen         EURJPY=     129.60         129.26      +0.26%         -4.13%      +129.7000   +128.8200
 Dollar/Swiss     CHF=        0.9799         0.9831      -0.33%         +0.57%      +0.9845     +0.9800
 Sterling/Dollar  GBP=        1.2885         1.2843      +0.33%         -4.64%      +1.2893     +1.2830
 Dollar/Canadian  CAD=        1.2972         1.3027      -0.42%         +3.14%      +1.3067     +1.2954
 Australian/Doll  AUD=        0.7342         0.7324      +0.25%         -5.88%      +0.7349     +0.7308
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1442         1.1425      +0.15%         -2.11%      +1.1448     +1.1411
 Euro/Sterling    EURGBP=     0.9058         0.9047      +0.12%         +1.97%      +0.9061     +0.9034
 NZ Dollar/Dolar  NZD=        0.6692         0.6690      +0.03%         -5.56%      +0.6701     +0.6671
 Dollar/Norway    NOK=        8.3221         8.3261      -0.05%         +1.40%      +8.3676     +8.3174
 Euro/Norway      EURNOK=     9.7154         9.6815      +0.35%         -1.35%      +9.7185     +9.6763
 Dollar/Sweden    SEK=        9.0997         9.1248      +0.16%         +10.95%     +9.1561     +9.0943
 Euro/Sweden      EURSEK=     10.6236        10.6068     +0.16%         +7.97%      +10.6310    +10.5970
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Tom Finn in London; Editing by Dan Grebler)
  
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