FOREX-Dollar rebounds from post-Fed losses as U.S. shutdown looms

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* Markets brace for possible U.S. govt shutdown

* U.S. data mixed overall, but will not stop Fed fromtightening

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh (Recasts, adds comment, FX table, U.S. data, updates prices,changes byline, dateline; previous LONDON)

NEW YORK, Dec 21 (Reuters) - The dollar gained on Friday,reversing most of its losses after the Federal Reserve flaggedfewer interest rate hikes earlier this week, as investors soughtthe currency's safety amid persistent equity market volatilityand a possible U.S. government shutdown.

The safe-haven yen also gained versus the dollar, benefitingfrom the overall market anxiety. The Japanese currency was ontrack to post its largest weekly percentage rise against thegreenback in 10 months.

U.S. President Donald Trump on Friday threatened a "verylong" government shutdown just hours ahead of a midnightdeadline, calling on the Senate to pass spending legislationthat includes his $5 billion demand for border wall funding.

While the news has not pressured U.S. stocks overall,so-called defensive shares have gained, suggesting somenervousness about the general market environment. .N

"It's not clear at this stage whether President Trump wouldagree to a continuing resolution to temporarily fund thegovernment, or would instead seek a government shutdown, whichwould go into effect at midnight tonight," said NickBennenbroek, currency strategist at Wells Fargo Securities inNew York.

He added that if the shutdown goes into effect, he expectsthe dollar to continue its bounce next week.

U.S. economic reports on Friday, meanwhile, were mixed andhad minimal impact on the dollar.

Data showed orders for nondefense capital goods excludingaircraft, a closely watched proxy for business spending plans,dropped 0.6 percent last month after an upwardly revised 0.5percent increase in October.

The U.S. economy also slowed slightly more than previouslyestimated in the third quarter, and momentum appears to havemoderated further in the fourth, according to the CommerceDepartment.

Data also indicated that U.S. consumer spending increasedsolidly in November, as households bought motor vehicles andspent more on utilities, but wage growth remained moderate,suggesting the current pace of consumption was unlikely to besustained.

The so-called core PCE price index, the Fed's preferredinflation measure, rose to 1.9 percent year-on-year, from aneight-month low of 1.8 percent in October.

"With economic growth strong, helped by a pickup inconsumption growth, and core inflation close to the 2 percenttarget, there appears to be little in the incoming data thatwould prompt the Fed to halt raising rates imminently," saidMichael Pearce, senior U.S. economist at Capital Economics inNew York.

In late morning trading, the dollar index rose 0.5 percentto 96.759 .DXY .

The euro, the largest component of the dollar index, fell0.4 percent versus the dollar to $1.1392EUR= .

As liquidity thinned ahead of the Christmas and New Yearholidays, large currency options had an impact on the cashmarket. For instance, large options around the $1.15 level alsopulled the euro lower.

The dollar, meanwhile, slipped 0.1 percent versus the yen to111.21 yen JPY= .


Currency bid prices at 10:45AM (1545 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session Euro/Dollar EUR= $1.1394$1.1444 -0.44% -5.02% +1.1475 +1.1384 Dollar/Yen JPY= 111.2000 111.2800 -0.07% -1.30% +111.4500 +110.9400 Euro/Yen EURJPY= 126.70 127.37 -0.53% -6.27% +127.6900 +126.5500 Dollar/Swiss CHF= 0.9917 0.9878 +0.39% +1.79% +0.9930 +0.9862 Sterling/Dollar GBP= 1.2651 1.2655 -0.03% -6.36% +1.2697 +1.2632 Dollar/Canadian CAD= 1.3533 1.3507 +0.19% +7.60% +1.3563 +1.3492 Australian/Doll AUD= 0.7098 0.7109 -0.15% -9.01% +0.7123 +0.7073 ar Euro/Swiss EURCHF= 1.1300 1.1305 -0.04% -3.33% +1.1324 +1.1292 Euro/Sterling EURGBP= 0.9004 0.9043 -0.43% +1.37% +0.9051 +0.8999 NZ NZD= 0.6738 0.6774 -0.53% -4.91% +0.6790 +0.6725 Dollar/Dollar Dollar/Norway NOK= 8.7374 8.6803 +0.66% +6.47% +8.7595 +8.6475 Euro/Norway EURNOK= 9.9579 9.9450 +0.13% +1.11% +9.9935 +9.9124 Dollar/Sweden SEK= 9.0069 8.9746 -0.10% +9.82% +9.0403 +8.9274 Euro/Sweden EURSEK= 10.2643 10.2743 -0.10% +4.33% +10.3105 +10.2370

(Reporting by Gertrude Chavez-Dreyfuss; additional reporting bySaikat Chatterjee in London; editing by Jonathan Oatis) ((gertrude.chavez@thomsonreuters.com; 646-223-6322; ReutersMessaging: rm://gertrude.chavez.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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