- Markets brace for possible U.S. govt shutdown
- U.S. data mixed overall, but will not stop Fed from tightening
- Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
(Recasts, adds comment, FX table, U.S. data, updates prices, changes byline, dateline; previous LONDON)
The dollar gained on Friday, reversing most of its losses after the Federal Reserve flagged fewer interest rate hikes earlier this week, as investors sought the currency's safety amid persistent equity market volatility and a possible U.S. government shutdown.
The safe-haven yen also gained versus the dollar, benefiting from the overall market anxiety. The Japanese currency was on track to post its largest weekly percentage rise against the greenback in 10 months.
U.S. President Donald Trump on Friday threatened a "very long" government shutdown just hours ahead of a midnight deadline, calling on the Senate to pass spending legislation that includes his $5 billion demand for border wall funding.
While the news has not pressured U.S. stocks overall, so-called defensive shares have gained, suggesting some nervousness about the general market environment. .N
"It’s not clear at this stage whether President Trump would agree to a continuing resolution to temporarily fund the government, or would instead seek a government shutdown, which would go into effect at midnight tonight," said Nick Bennenbroek, currency strategist at Wells Fargo Securities in New York.
He added that if the shutdown goes into effect, he expects the dollar to continue its bounce next week.
U.S. economic reports on Friday, meanwhile, were mixed and had minimal impact on the dollar.
Data showed orders for nondefense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.6 percent last month after an upwardly revised 0.5 percent increase in October.
The U.S. economy also slowed slightly more than previously estimated in the third quarter, and momentum appears to have moderated further in the fourth, according to the Commerce Department.
Data also indicated that U.S. consumer spending increased solidly in November, as households bought motor vehicles and spent more on utilities, but wage growth remained moderate, suggesting the current pace of consumption was unlikely to be sustained.
The so-called core PCE price index, the Fed's preferred inflation measure, rose to 1.9 percent year-on-year, from an eight-month low of 1.8 percent in October.
"With economic growth strong, helped by a pickup in consumption growth, and core inflation close to the 2 percent target, there appears to be little in the incoming data that would prompt the Fed to halt raising rates imminently," said Michael Pearce, senior U.S. economist at Capital Economics in New York.
In late morning trading, the dollar index rose 0.5 percent to 96.759 .DXY .
The euro, the largest component of the dollar index, fell 0.4 percent versus the dollar to $1.1392 EUR= .
As liquidity thinned ahead of the Christmas and New Year holidays, large currency options had an impact on the cash market. For instance, large options around the $1.15 level also pulled the euro lower.
The dollar, meanwhile, slipped 0.1 percent versus the yen to 111.21 yen JPY= .
======================================================== Currency bid prices at 10:45AM (1545 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1394 $1.1444 -0.44% -5.02% +1.1475 +1.1384 Dollar/Yen JPY= 111.2000 111.2800 -0.07% -1.30% +111.4500 +110.9400 Euro/Yen EURJPY= 126.70 127.37 -0.53% -6.27% +127.6900 +126.5500 Dollar/Swiss CHF= 0.9917 0.9878 +0.39% +1.79% +0.9930 +0.9862 Sterling/Dollar GBP= 1.2651 1.2655 -0.03% -6.36% +1.2697 +1.2632 Dollar/Canadian CAD= 1.3533 1.3507 +0.19% +7.60% +1.3563 +1.3492 Australian/Doll AUD= 0.7098 0.7109 -0.15% -9.01% +0.7123 +0.7073 arEuro/Swiss EURCHF= 1.1300 1.1305 -0.04% -3.33% +1.1324 +1.1292 Euro/Sterling EURGBP= 0.9004 0.9043 -0.43% +1.37% +0.9051 +0.8999 NZ NZD= 0.6738 0.6774 -0.53% -4.91% +0.6790 +0.6725 Dollar/DollarDollar/Norway NOK= 8.7374 8.6803 +0.66% +6.47% +8.7595 +8.6475 Euro/Norway EURNOK= 9.9579 9.9450 +0.13% +1.11% +9.9935 +9.9124 Dollar/Sweden SEK= 9.0069 8.9746 -0.10% +9.82% +9.0403 +8.9274 Euro/Sweden EURSEK= 10.2643 10.2743 -0.10% +4.33% +10.3105 +10.2370
