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FOREX-Dollar off recent highs after FBI's move on Clinton causes a stir

Published 31/10/2016, 04:32 pm
© Reuters.  FOREX-Dollar off recent highs after FBI's move on Clinton causes a stir
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* DXY poised for monthly gain but shy of nearly 9-month high

* Fed, BOJ seen keeping respective policies on hold this week

* Euro zone GDP, inflation data due on Monday

By Lisa Twaronite and Hideyuki Sano

TOKYO, Oct 31 (Reuters) - The dollar edged up on Monday, staying on track for a monthly gain, but remained shy of recent highs as investors became less sure that Hillary Clinton would win the U.S. presidential election after the FBI's new probe into her private email use.

The dollar index, which tracks the greenback against a basket of six major currencies, added 0.1 percent to 98.418 .DXY =USD , up 3.1 percent for October and likely to match May's gain, but below last Tuesday's nearly nine-month high of 99.119.

The dollar tumbled late on Friday after the U.S. Federal Bureau of Investigation revealed its probe of newly found emails related to Clinton's use of a private server, rocking the Democratic candidate's campaign just days ahead of the Nov. 8 election. saw the issue handing an advantage to Republican rival Donald Trump, who has been trailing Clinton in polls but has shown some signs of slight improvement in recent days.

Investors have tended to see Clinton as the candidate of the status quo, while there is greater uncertainty over what a victory Trump might mean for U.S. foreign policy, international trade deals and the domestic economy.

"Clinton's email problems are an ongoing issue, and resolution seems unlikely ahead of the election next week," said Kumiko Ishikawa, senior FX analyst at Gaitame.Com Research Institute in Tokyo.

"So it's difficult for investors have a 'risk-on' mood, but at the same time, unless new factors emerge, it's hard for them to sell the dollar, too," she said.

Before news of the FBI's fresh probe emerged on Friday, the dollar had gained on stronger-than-expected U.S. GDP growth, which reinforced expectations of a Federal Reserve rate hike in December.

The Fed is widely expected to keep its policy on hold at its policy meeting ending on Wednesday. Money markets were still pricing in about a 70 percent chance of a rate hike in December.

"There's no change in the market's perception that the Fed will raise rates in December. And the biggest question for the market is the pace of the Fed's rate hike next year," said Kyosuke Suzuki, director of forex at Societe Generale (PA:SOGN).

Against the yen, the dollar inched 0.1 percent higher to 104.77 yen JPY= . Although it remained below Friday's three-month high of 105.54, it was on track to gain 3.4 percent for the month.

Current markets showed little reaction to data released earlier on Monday showing Japan's industrial output stalled last month. Retail sales also fell more than expected from a year ago, further evidence that private consumption remains a drag on growth. Bank of Japan began its two-day policy review on Monday and was also widely expected to stand pat, particularly after broad hints from Governor Haruhiko Kuroda. euro EUR= slipped 0.2 percent to $1.0969, giving back some of its gains on Friday, when it rose almost 0.9 percent to log its largest one-day rise in nearly two months. It remained far above its 7 1/2-month low of $1.08510 touched on Tuesday, though still poised to shed 2.4 percent for the month.

In Europe, the euro zone flash GDP estimate and inflation data are due later in the day.

While the data may not significantly change investors' perception on the euro zone economy, stronger readings could fuel talk that the European Central Bank may scale back its bond buying programme next year.

The Mexican peso MXN=D2 , seen as the best barometer on the markets' view on the U.S. election, was fractionally higher in Asian trade at 18.9700 to the dollar, after notching a three-week low of 19.1005 touched on Friday. (Editing by Simon Cameron-Moore)

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