November 27, 2018 / 3:11 PM / 9 months ago

FOREX-Dollar gains as Fed's Clarida backs further rate hikes

    * Fed's Clarida cites importance of economic data
    * Trump expects to raise tariffs on Chinese imports

 (New throughout, updates trading, adds comments to U.S. market
open, new byline, changes dateline, previous LONDON)
    By Karen Brettell
    NEW YORK, Nov 27 (Reuters) - The U.S. dollar gained on
Tuesday after Federal Reserve Vice Chair Richard Clarida backed
further interest rate hikes but noted the importance of
monitoring economic data as the U.S. central bank approached a
neutral stance.
    In a carefully worded speech that comes on the heels of
another volatile stock market drop, Clarida stressed how
difficult it was for the U.S. central bank to determine both the
neutral interest rate and the maximum level of unemployment.

    It comes after Fed Chairman Jerome Powell last month said
the Fed may raise interest rates above an estimated neutral
setting as the "remarkably positive" U.S. economy continues to
    “The Powell speech on the overshoot of neutral was construed
as a very hawkish delivery,” said Mark McCormick, North American
head of FX strategy at TD Securities in Toronto. "The Fed has
been gently walking that back since."
    Clarida's comments are "reconfirming that the overshooting
of the neutral is not a specific goal, but it’s something that
they will probably do if the data allows them to do it,"
McCormick said.
    Slowing global growth and volatile stock markets have raised
expectations the Fed may halt its tightening cycle sooner than
previously expected.
    A speech by Powell on Wednesday and minutes from the Fed’s
Nov. 7-8 meeting on Thursday will be evaluated for further
indications of how many more times the U.S. central bank is
likely to hike interest rates.
    The dollar index climbed earlier on Tuesday after
U.S. President Donald Trump said he expects to raise tariffs on
$200 billion in Chinese imports to 25 percent from 10 percent
    Trump and Chinese President Xi Jinping are due to meet at a
G20 meeting in Buenos Aires on Nov. 30 to discuss contentious
trade matters.
    "If there's no breakthrough, that makes it more likely that
more tariffs will be imposed and that increases downside risks
to trade," said Lee Hardman, a currency analyst at MUFG in
    Outperformance by emerging markets and other high beta
currencies on Tuesday, however, suggested that much of the
pessimism around the lack of a trade deal may already be priced
into the market.
    “They don’t have do anything, and if they don’t do anything
there’s a lot of bad news priced in,” said McCormick.
    Sterling was weaker after Trump said the agreement allowing
Britain to leave the European Union may make trade between
Washington and London more difficult. 
    Currency bid prices at 9:57AM (1457 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1302        $1.1326     -0.21%         -5.79%      +1.1344     +1.1300
 Dollar/Yen       JPY=        113.6900       113.5900    +0.09%         +0.91%      +113.7000   +113.4200
 Euro/Yen         EURJPY=     128.51         128.65      -0.11%         -4.93%      +128.8300   +128.3900
 Dollar/Swiss     CHF=        0.9994         0.9983      +0.11%         +2.58%      +1.0003     +0.9976
 Sterling/Dollar  GBP=        1.2738         1.2833      -0.74%         -5.73%      +1.2834     +1.2734
 Dollar/Canadian  CAD=        1.3275         1.3250      +0.19%         +5.55%      +1.3281     +1.3235
 Australian/Doll  AUD=        0.7219         0.7220      -0.01%         -7.46%      +0.7269     +0.7214
 Euro/Swiss       EURCHF=     1.1296         1.1309      -0.11%         -3.36%      +1.1324     +1.1297
 Euro/Sterling    EURGBP=     0.8871         0.8843      +0.32%         -0.14%      +0.8887     +0.8829
 NZ               NZD=        0.6784         0.6768      +0.24%         -4.26%      +0.6810     +0.6754
 Dollar/Norway    NOK=        8.5953         8.5865      +0.10%         +4.73%      +8.6171     +8.5760
 Euro/Norway      EURNOK=     9.7154         9.7267      -0.12%         -1.35%      +9.7469     +9.7163
 Dollar/Sweden    SEK=        9.0877         9.0928      -0.28%         +10.80%     +9.1107     +9.0710
 Euro/Sweden      EURSEK=     10.2720        10.3008     -0.28%         +4.40%      +10.3057    +10.2708
 (Additional reporting by Dhara Ranasinghe in London; Editing by
Bernadette Baum)
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