U.S. Dollar Backs Off As Investors Dubious Over Dec. U.S. Rate Rise

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The U.S. dollar’s rising momentum eased on Thursday in Asia as market participants calibrated odds of a Federal Reserve rate increase this year.

The suggestion by several Fed officials that the U.S. central bank may start raising rates in December has fueled dollar-buying in recent sessions.

Fed Chairwoman Janet Yellen said Wednesday a December rate increase would be “a live possibility.” (http:// www.marketwatch.com/story/feds-yellen-december-is-live-possibility-for-first-interest-rate-increase-2015-11-04) Fed Vice Chairman Stanley Fischer later echoed her sentiment, saying core inflation won’t be far from the 2% target once the rising dollar and falling oil prices stabilize (http://www.marketwatch.com/story/fed-doesnt-need-independence-to-stem- financial-crises-vice-chairman-fischer-2015-11-04).

“They don’t give us a conviction, but they are steadily paving the way (for a potential liftoff in December),” said Shinji Kureda, head of foreign-exchange trading at Sumitomo Mitsui Banking Corp.

Still, Kureda said many market participants are treading carefully as any sharp appreciation would have negative implications for the U.S. economy and lower the probability of a rate increase.

The euro was at $1.0872, compared with $1.0868 late Wednesday in New York, according to EBS. The dollar was at Yen121.50 yen, compared with Yen121.55.

Dealers say the dollar’s gains will likely be more pronounced against the euro than the yen because European Central Bank officials give clearer signal for additional easing.

In the near term, the market’s focus will be on U.S. nonfarm payrolls data due Friday and how Fed officials would assess labor-market conditions.

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