- Euro recovers from last week's weakness, up 0.5 pct
- Dollar falls from 18-month high before two-day Fed meeting
- Yen and Swiss franc rise as risk sentiment sours
- GRAPHIC-World FX rates in 2018: http://tmsnrt.rs/2egbfVh
(Updates prices, adds comment)
The dollar fell to a one-week low on Tuesday as investors unwound long bets on the currency, anticipating that the Federal Reserve could slow the pace of U.S. interest rate hikes after this week's policy meeting.
The greenback weakened for a second straight session. A rout on Wall Street on Monday, the recent batch of gloomy U.S. economic data and signs of a slowdown in Europe and China have bolstered a view that the Fed's widely expected rate hike on Wednesday could mark the end of three years of steady rate increases.
U.S. President Donald Trump's critical comments on the Fed did not help the dollar's cause either. In a tweet overnight, Trump said it was "incredible" for the central bank to even consider tightening policy given the global economic and political uncertainties.
"The market sees potential scope for the Fed to dial back on its forecasts for growth and rate hikes next year given signs of gathering economic clouds on the horizon," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Shaun Osborne, chief FX strategist at Scotiabank in Toronto, noted that Fed rate hike expectations have slipped, with markets pricing in a 70 percent chance of a rate increase, down from a 78 percent chance on Monday.
"That is quite a significant move right ahead of the policy decision," he said. Investor confidence has deteriorated, leading to the gloomiest outlook for the world economy in a decade, a survey by Bank of America Merrill Lynch found. The dollar has replaced technology stocks as the most crowded trade for the first time since January, it said.
In afternoon trading, the dollar index .DXY was down 0.1 percent at 97.012, after earlier sliding to its weakest since Dec 10.
Risk-off sentiment on Tuesday lifted the Japanese yen JPY= and Swiss franc CHF= . With the prospect of a "dovish rate hike" keeping the dollar in check, the euro EUR= rose 0.2 percent to $1.1368, recovering losses from Monday, when it was hit by weak euro zone data.
Still, the European Central Bank's assessment last week that the balance of risks was moving to the downside, combined with protests in France weighing on business, means euro appreciation is still a few months away, Goldman Sachs analysts said.
Sterling GBP=D3 , which has been heavily sold off in the past few months on Brexit uncertainty, rose 0.2 percent to $1.2647, helped by a weaker dollar and confirmation British Prime Minister Theresa May will seek parliamentary approval for her much-criticized Brexit deal in mid-January.
======================================================== Currency bid prices at 2:55PM (1955 GMT)Description RICE Last U.S. Close Pct YTD Pct High Bid Low Bid Previous Change Change Session Euro/Dollar EUR= $1.1359 $1.1346 +0.11 -5.31 +1.1402 +1.1337 Dollar/Yen JPY= 112.5100 112.8200 -0.27 -0.14 +112.860 +112.2600 0 Euro/Yen EURJPY= 127.81 128.02 -0.16 -5.45 +128.110 +127.6500 0 Dollar/Swiss CHF= 0.9923 0.9928 -0.05 +1.85 +0.9937 +0.9900 Sterling/Dollar GBP= 1.2643 1.2625 +0.14 -6.43 +1.2705 +1.2610 Dollar/Canadian CAD= 1.3483 1.3403 +0.60 +7.20 +1.3496 +1.3390 Australian/Doll AUD= 0.7173 0.7172 +0.01 -8.05 +0.7203 +0.7166 arEuro/Swiss EURCHF= 1.1272 1.1266 +0.05 -3.55 +1.1296 +1.1261 Euro/Sterling EURGBP= 0.8985 0.8993 -0.09 +1.13 +0.9010 +0.8963 NZ NZD= 0.6845 0.6799 +0.68 -3.40 +0.6879 +0.6803 Dollar/DollarDollar/Norway NOK= 8.7416 8.6454 +1.11 +6.51 +8.7445 +8.6343 Euro/Norway EURNOK= 9.9318 9.8149 +1.19 +0.84 +9.9370 +9.8072 Dollar/Sweden SEK= 9.0709 9.0571 +0.25 +10.6 +9.0881 +9.0257 Euro/Sweden EURSEK= 10.3056 10.2796 +0.25 +4.74 +10.3100 +10.2650 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC-World FX rates in 2018 http://tmsnrt.rs/2egbfVh^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
