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FOREX-Dollar slips towards a 10-day low on growth concerns

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* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee

LONDON, Dec 20 (Reuters) - The dollar fell towards a 10-daylow on Thursday against its rivals as concerns grew the UnitedStates may be heading for a sharp economic slowdown next yeardespite the Federal Reserve raising interest rates for thefourth time in a year.

Although U.S. policymakers have said they may raise interestrates three times by early 2020, the U.S. bond yield curve -- awidely considered indicator of future recessions -- flattened to10 basis points and just a shade above a 11-year low set earlierthis month.

An inversion of the bond yield curve is considered a sign ofeconomic recession with longer-term yields falling belowshorter-dated maturities and those concerns triggered a globalselloff in risky assets such as stocks and high yieldingcurrencies like the New Zealand dollar NZD= .

"We are seeing some messy markets in currencies this morningand the dollar is struggling to gain traction after the Feddecision," said Alvin Tan, a currency strategist at SocieteGenerale in London.

The dollar fell 0.4 percent .DXY against its rivals to96.68 and within a whisker of a 9-day low of 96.554 hit in theprevious session.

Indeed, while the Fed's 'dot plots' now signal two, insteadof three, rate hikes for next year, the market is unconvincedand is barely pricing in one increase in a reflection ofheightened market concerns of the state of the global economy.

While the Fed raised interest rates by a quarter point,China's central bank rolled out a policy tool to spur lending tosmall and private firms in a move that some analysts termed asequivalent to a targeted rate cut.

The Japanese yen JPY=EBS advanced half a percent, changinghands at 111.92 on the dollar and poised for fifth straight dayof gains. In a widely expected decision, the Bank of Japan keptrates steady, maintaining its ultra-loose monetary settings.

The euro led gainers EUR=EBS in London trading with thesingle currency advancing nearly half a percent against thedollar at $1.1428.

The single currency was supported by news Italy had struck adeal with the European Commission over its contested 2019 budgetand some solid trade data this week.

Sterling GBP=D3 gained a third of a percent to $1.2658. The Bank of England is due to hold its final policy meeting ofthe year on Thursday, where markets expect the central bank tostay on hold.

Elsewhere, Sweden's currency jumped more than one percentagainst the dollar on Thursday after the central bank raisedinterest rates for the first time in more than seven years.

saikat.chatterjee@thomsonreuters.com saikat.chatterjee.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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