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U.S. dollar falls as risk appetite improves with data showing slowdown

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NEW YORK —

The dollar slid against most currencies in choppy, thin trading on Friday as data signaled that the U.S.

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economy is cooling a bit, reinforcing expectations of smaller interest rate increases from the Federal

Reserve and improving investors’ risk appetite.

The personal consumption expenditures (PCE) price index rose 0.1% last month after climbing 0.4% in

October. In the 12 months through November, the PCE index increased 5.5% after advancing 6.1% in October.

Excluding the volatile food and energy components, the PCE index gained 0.2% after increasing 0.3% in

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October. The so-called core PCE price index rose 4.7% on a year-on-year basis in November after increasing

5.0% in October. The Fed tracks the PCE price indexes for its monetary policy.

Both the S&P 500 and the Dow were higher on the day, while commodity currencies such as the Australian,

New Zealand and Canadian dollars, which are highly sensitive to risk sentiment, also gained against the

greenback. Investors also sold safe-haven Treasuries, pushing yields higher.

“Stocks are feeling a little more comfortable today. There seems to be no panic,” said Amo Sahota,

executive director at FX consulting firm Klarity FX in San Francisco.

“The inflation data is moving in the right direction, although not fast enough and the growth in the

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U.S. economy has not been hindered significantly. It’s growing still at a gradual pace and there’s no

choking of the economy just yet,” he added.

The Fed is widely expected to raise interest rates by just 25 basis points at its next policy

meeting, in January, after multiple big increases.

In afternoon trading, the euro rose 0.2% against the dollar to $1.0616.

The Australian, New Zealand and Canadian currencies advanced against the U.S. dollar. The Aussie

unit was up 0.4% at US$0.6710, the kiwi, or New Zealand dollar, gained 0.6% to US$0.6287.

Against the Canadian dollar, the greenback fell 0.4% to C$1.3599.

The Canadian dollar also benefited from data showing that the

Canadian economy

grew by 0.1% in October versus September, with another 0.1% increase in GDP seen likely in November,

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Statistics Canada data showed.

Against the yen, however, the dollar rose 0.4% to 132.89 yen. The Japanese currency,

though, was on track for a weekly drop of 2.7% after the Bank of Japan (BOJ) tweaked a key bond market

policy earlier this week.

A second report on Friday showed that new orders for U.S.-made capital goods rose moderately in November

while shipments fell, pointing to a slowdown in business spending on equipment this quarter as higher

borrowing costs cool demand for goods.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending

plans, rose 0.2% last month, data showed. These so-called core capital goods orders increased 0.3% in

October. However, shipments of core capital goods dipped 0.1% after increasing 1.4% in October.

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Another piece of data showed

U.S. consumers

expect price pressures to moderate notably in the next year, with a benchmark survey on Friday showing

their one-year inflation outlook dropping in December to the lowest level in 18 months. This is a key number

that Fed Chair Jerome Powell mentioned in one of his press briefings.

In what has been a brutal year for global markets, the dollar has surged almost 9% as the Fed has

aggressively hiked rates to tame inflation.

The dollar index, however, has dropped more than 8% since hitting a 20-year high in September, with a

sharp slowdown in U.S. inflation raising hopes that the Fed may soon end its tightening cycle.

The index was last little changed at 104.35.

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Currency bid prices at 1:47PM (1847 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 104.3900 104.3700 +0.04% 9.123% +104.5300 +104.1100

Euro/Dollar $1.0608 $1.0600 +0.09% -6.68% +$1.0633 +$1.0587

Dollar/Yen 132.8950 132.3800 +0.40% +15.45% +133.1350 +132.1700

Euro/Yen 140.96 140.22 +0.53% +8.16% +141.2100 +140.0800

Dollar/Swiss 0.9340 0.9312 +0.32% +2.41% +0.9342 +0.9288

Sterling/Dollar $1.2027 $1.2037 -0.05% -11.04% +$1.2089 +$1.2020

Dollar/Canadian 1.3606 1.3647 -0.29% +7.63% +1.3658 +1.3563

Aussie/Dollar $0.6705 $0.6669 +0.61% -7.70% +$0.6725 +$0.6662

Euro/Swiss 0.9909 0.9867 +0.43% -4.44% +0.9920 +0.9866

Euro/Sterling 0.8819 0.8797 +0.25% +4.99% +0.8821 +0.8784

NZ $0.6281 $0.6248 +0.61% -8.16% +$0.6304 +$0.6235

Dollar/Dollar

Dollar/Norway 9.8695 9.8775 -0.09% +12.03% +9.9150 +9.8335

Euro/Norway 10.4740 10.4550 +0.18% +4.61% +10.5130 +10.4325

Dollar/Sweden 10.5283 10.4683 +0.67% +16.75% +10.5364 +10.4276

Euro/Sweden 11.1691 11.0944 +0.67% +9.14% +11.1881 +11.0850

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Harry Robertson in London and Rae Wee in

Singapore; Editing by Louise Heavens, Jonathan Oatis and Leslie Adler)

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