November 19, 2018 / 8:20 PM / 4 months ago

FOREX-Dollar declines to 2-week low on cautious Fed comments

    * Euro hits two-week high vs dollar
    * Bullish dollar sentiment fading
    * Dollar may fall as much 6 pct in 2019 -Goldman Sachs note
    * Capital Economics sees rates peaking between 2.75-3 pct in
2019

 (Updates prices, adds comment)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 19 (Reuters) - The dollar dropped to two-week
lows on Monday, pressured by cautious comments about the U.S.
economy from Federal Reserve officials suggesting the central
bank may be nearing the end of its tightening cycle.
    Against a basket of six major currencies, the
greenback fell to 96.120, its lowest since Nov. 8, after falling
nearly half a percent last week, its biggest weekly drop since
late September. The index was last down 0.3 percent at 96.208.
    Fed Vice Chair Richard Clarida and Dallas Fed President
Robert Kaplan on Friday raised concerns over a potential global
slowdown that has markets betting heavily that the rate-hike
cycle is on its last legs, even as they still signaled further
interest rate increases ahead.
    Fed Chairman Jerome Powell on Wednesday also cited slowing
global growth as a headwind to the U.S. economy.
    Capital Economics sees the federal funds rate peaking at
2.75-3.0 percent in mid-2019. 
    "Although investors now think the rate will peak closer to
the bottom of this range than the top...they are still a long
way from discounting the substantial rate cuts that we
anticipate in 2020 as the Fed responds to a sharp economic
slowdown," said John Higgins, chief market economist, at Capital
Economics in London.
    The Fed has raised interest rates three times this year and
is expected to raise its target again in December, to a range of
2.25 percent to 2.5 percent. 
    The dollar has been the surprise winner of 2018, having
risen nearly 10 percent from April lows thanks to a combination
of interest rate hikes and strong economic data. But the growing
view that U.S. economic growth may have peaked has begun to
erode the gains.    
    
    DOLLAR PEAK
    In a 2019 outlook note, strategists at Goldman Sachs said
the greenback may decline as much as 6 percent against most of
its developed market rivals, as the U.S. economy starts to slow
with the impact from tax cuts and easy conditions fading through
the year.
    The euro, meanwhile, rallied against the dollar despite
concerns about negotiations between Brussels and Rome on Italy's
budget plans. It was changing hands at $1.1452, up 0.3
percent, after hitting two-week highs earlier.
    Ned Rumpeltin, European head of FX strategy, at TD
Securities in London, said a clear break above $1.1440, a minor
trendline resistance, would target $1.15, while a close above
that level would signal a change in trend in favor of the euro.
    Elsewhere, sterling remained in the spotlight with the
currency expected to stay under pressure until the market gets
more clarity on the progress of the Brexit deal.
    It rose 0.2 percent versus the dollar to $1.2862
after a 1 percent drop last week as British Prime Minister
Theresa May's draft EU divorce deal met with stiff opposition
and several ministers resigned.    
    
    ========================================================
    Currency bid prices at 3:07 PM (2007 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1452        $1.1418     +0.30%         -4.53%      +1.1465     +1.1394
 Dollar/Yen       JPY=        112.5200       112.8200    -0.27%         -0.13%      +112.8700   +112.4300
 Euro/Yen         EURJPY=     128.86         128.82      +0.03%         -4.68%      +129.0500   +128.4800
 Dollar/Swiss     CHF=        0.9936         0.9997      -0.61%         +1.98%      +1.0007     +0.9925
 Sterling/Dollar  GBP=        1.2854         1.2837      +0.13%         -4.87%      +1.2883     +1.2797
 Dollar/Canadian  CAD=        1.3172         1.3143      +0.22%         +4.73%      +1.3201     +1.3142
 Australian/Doll  AUD=        0.7291         0.7334      -0.59%         -6.56%      +0.7327     +0.7278
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1379         1.1415      -0.32%         -2.65%      +1.1420     +1.1371
 Euro/Sterling    EURGBP=     0.8907         0.8899      +0.09%         +0.27%      +0.8931     +0.8868
 NZ Dollar/Dolar  NZD=        0.6834         0.6876      -0.61%         -3.56%      +0.6877     +0.6817
 Dollar/Norway    NOK=        8.4758         8.4390      +0.44%         +3.28%      +8.4954     +8.4280
 Euro/Norway      EURNOK=     9.7074         9.6368      +0.73%         -1.43%      +9.7218     +9.6218
 Dollar/Sweden    SEK=        9.0050         9.0042      +0.32%         +9.79%      +9.0211     +8.9826
 Euro/Sweden      EURSEK=     10.3150        10.2819     +0.32%         +4.83%      +10.3200    +10.2680
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Grant McCool
and Lisa Shumaker)
  
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