September 25, 2018 / 7:12 PM / 7 months ago

FOREX-Dollar slips ahead of widely expected Fed rate hike

    * Praet says Draghi comments nothing new; euro gains
    * Dollar quiet ahead of two-day Fed meeting; rate hike
    * December rate hike priced in at 80 percent
    * GRAPHIC-World FX rates in 2018:

 (Adds comments, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 25 (Reuters) - The dollar was slightly weaker
on Tuesday ahead of a Federal Reserve meeting that is widely
expected to end with an interest rate hike, as investors already
have priced in two more rate increases this year and some in
2019, leaving little room for further currency gains.
    The Fed kicked off its two-day meeting, with market
participants focused on the U.S. central bank's view on the
economy as well as its guidance on future tightening. The Fed
already has raised rates twice in 2018.
    The dollar has benefited from a hawkish rate outlook all
year, but has lost steam the last few weeks, as other economies
such as the euro zone improved, keeping them closer to a shift
to tighter monetary policy. 
    Since mid-August, the dollar has declined 3.1 percent
against a basket of currencies.
    "As a rate increase is highly likely and therefore priced
in, the reaction of the dollar will be influenced to a large
degree by the Fed's forward guidance and whether there are any
noticeable changes in the 'dot-plots'," said Fawad Razaqzada,
market analyst at in London.
    Fed officials' median projection on the number of rate
increases is commonly referred to as its dot-plot.     
    In afternoon trading, the dollar index was down 0.1 percent
 at 94.120. 
    John Lynch, chief investment strategist at LPL Financial in
Charlotte, expects the Fed to maintain a flexible policy on
Wednesday that remains data dependent.
    "Any change in the Fed's view of inflation could roil
markets," Lynch said. "But we believe recent readings will allow
the Fed to continue to view inflationary risks as balanced,
leaving room for it to continue to hike rates gradually with a
potential slowdown in the pace as we approach the neutral rate."
    The euro, on the other hand, rose despite a European Central
Bank official downplaying on Tuesday its President Mario
Draghi's comments a day earlier about "relatively vigorous"
    Some analysts said the euro was also supported by signs
Italy's anti-establishment coalition is likely to reach a
compromise over its 2019 budget.
    The euro was last up 0.2 percent at $1.1771. It had
touched a 3-1/2 month high on Monday after Draghi expressed
confidence in euro zone inflation and wage growth.
    But the ECB's chief economist Peter Praet said on Tuesday
there was nothing new in Draghi's comments. The single currency,
however, managed to find strength. 
    Against the yen, the dollar was up 0.1 percent at 112.92 yen
 after minutes from the Bank of Japan's July policy
meeting showed a few board members said the BoJ must consider
more seriously the potential dangers of ultra-easy policy.

    Currency bid prices at 2:52PM (1852 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1766        $1.1746     +0.17%         -1.92%      +1.1792     +1.1732
 Dollar/Yen       JPY=        112.9300       112.7900    +0.12%         +0.23%      +112.9700   +112.7500
 Euro/Yen         EURJPY=     132.90         132.51      +0.29%         -1.69%      +133.1000   +132.3800
 Dollar/Swiss     CHF=        0.9646         0.9646      +0.00%         -1.00%      +0.9671     +0.9637
 Sterling/Dollar  GBP=        1.3185         1.3119      +0.50%         -2.41%      +1.3193     +1.3096
 Dollar/Canadian  CAD=        1.2948         1.2955      -0.05%         +2.95%      +1.2972     +1.2936
 Australian/Doll  AUD=        0.7249         0.7252      -0.04%         -7.08%      +0.7263     +0.7237
 Euro/Swiss       EURCHF=     1.1353         1.1334      +0.17%         -2.87%      +1.1382     +1.1327
 Euro/Sterling    EURGBP=     0.8922         0.8952      -0.34%         +0.44%      +0.8975     +0.8920
 NZ               NZD=        0.6649         0.6643      +0.09%         -6.17%      +0.6658     +0.6631
 Dollar/Norway    NOK=        8.1284         8.1402      -0.14%         -0.96%      +8.1509     +8.1049
 Euro/Norway      EURNOK=     9.5662         9.5629      +0.03%         -2.87%      +9.5787     +9.5520
 Dollar/Sweden    SEK=        8.8049         8.7977      +0.24%         +7.35%      +8.8088     +8.7611
 Euro/Sweden      EURSEK=     10.3620        10.3369     +0.24%         +5.31%      +10.3722    +10.3118
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci
and Lisa Shumaker)
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