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FOREX-Dollar slips as market braces for week's risky events

Published 28/11/2016, 11:31 am
© Reuters.  FOREX-Dollar slips as market braces for week's risky events
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* Dollar index extends loss, pulls back from near 14-year highs

* Currencies brace for OPEC, Italy referendum, US jobs report

By Shinichi Saoshiro

TOKYO, Nov 28 (Reuters) - The dollar pulled further back from near 14-year highs as investors braced for upcoming events that could at least temporarily knock the greenback's bull run off course.

Adding to Friday's losses, the dollar index against a basket of major currencies .DXY dipped 0.2 percent to 101.31 following a pop above 102.00 on Thursday, its highest since March 2003.

The greenback had slipped late last week as investors took advantage of a pullback in U.S. bond yields and a holiday-shortened week to consolidate gains.

The U.S. currency was down 0.5 percent at 112.680 yen JPY= following a rise to an 8-month high of 113.900 last week and the euro EUR= was up 0.3 percent at $1.0611 after stooping to an 8-month trough of $1.0518 on Thursday.

The dollar has surged virtually without pause since Republican Donald Trump was elected president earlier this month, triggering a spike in Treasury yields on heightened expectations of enlarged fiscal spending and inflation.

The dollar could face some resistance this week ahead of potentially risk-laden events such as the midweek Organization of the Petroleum Exporting Countries (OPEC) meeting and Italy's Dec. 4 referendum on a constitutional reform.

Crude oil has slumped amid uncertainty over whether OPEC would reach an output deal. Italy's referendum could rattle financial markets by prompting the country's government to resign.

Currencies will also have Friday's U.S. non-farm payrolls to contend with.

"Those who have been following the dollar's uptrend since early November now sit on large profits, so it is not surprising if some lock the gains in," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.

Still, few expect the dollar's uptrend to end in the near term as the financial markets continue to price in the possibility of the Federal Reserve hiking interest rates more often in 2017 than initially anticipated.

"The dollar and Treasury yields did rise steeply in a short span of time. But for participants who think the bond market's 35-year bond rally is coming to an end, this is only the early stages of a dollar surge," Yamamoto said.

Elsewhere, the Australian dollar extended Friday's gains and rose 0.2 percent to $0.7444 AUD=D4 . The Aussie has benefited as Australia's debt yields tracked the surge in Treasury yields and rose to 11-month highs.

Sterling was flat at $1.2481 GBP=D4 while the New Zealand dollar was also little changed at $0.7046 NZD=D4 .

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