October 12, 2016 / 4:31 AM / in a year

FOREX-Dollar pressured by sterling's rebound from selloff

* Pound seen aided by Bloomberg report on May’s Brexit plan

* DXY slips from 7-month highs hit on rate hike expectations

TOKYO, Oct 12 (Reuters) - The recently buoyant dollar came under pressure in Asian trading on Wednesday, as sterling partially rebounded from its dramatic losses in the previous session.

The pound was up 1.5 percent at $1.2301, after tumbling as low as $1.2086 on Tuesday, heading towards a 31-year low of $1.1450 hit on Friday as investors feared the impact on Britain from leaving the European Union.

Sterling benefited from a Bloomberg report that British Prime Minister Theresa May has accepted that Parliament should be allowed to vote on her Brexit plan.

“May will accept voting at the Parliament, which is giving the pound a short-term boost, but I‘m not sure it’s long-lasting,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“Its latest fall was too much and too rapid, so it’s natural to see some rebound,” he said. “It seems the dollar’s weakness against sterling today is affecting the other dollar currency pairs as well, which is also natural.”

The dollar index, which tracks the greenback against a basket of six major rivals, slipped 0.2 percent to 97.504 after rising as high as 97.758 on Tuesday, its loftiest peak since March.

The dollar edged down 0.1 percent to 103.45 yen, while the euro was steady at $1.1052, recovering from a dip as low as $1.1049, its deepest nadir since early August.

The dollar had been on an upswing due to rising expectations that the U.S. Federal Reserve would raise interest rates as early as this year, with markets pricing in around a 70 percent chance of a hike in December.

The dollar has also benefited as Democratic presidential nominee Hillary Clinton widened her lead in opinion polls over Republican rival Donald Trump.

Investors awaited the minutes of the Federal Reserve Open Market Committee’s September meeting, scheduled to be released later on Wednesday, as well as U.S. retail sales data on Friday, for clues as to how close the U.S. central bank is coming to hiking interest rates.

“There is an increased probability of bigger interest rate differentials between Japan and the U.S., so that is a factor for yen softening, although this is not as big a factor as it used to be,” said Harumi Taguchi, principal economist at IHS Markit in Tokyo.

Bank of Japan policymakers have signalled they have a higher threshold for further easing, sticking to their pledge to expand stimulus but only to protect the economy from external shocks.

BOJ Governor Haruhiko Kuroda made no direct reference of the need to achieve his inflation target quickly when he reiterated to Japan’s parliament on Wednesday that he remains ready to cut interest rates or expand asset buying if needed.

Reporting by Tokyo markets team; Editing by Eric Meijer

Our Standards:The Thomson Reuters Trust Principles.
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