Dollar advances after strong U.S. data, Fed minutes

Dollar advances after strong U.S. data, Fed minutes
* U.S. manufacturing, construction data boost dollar
* Minutes show Fed to continue raising rates gradually
* Coming Up: U.S. payrolls report on Friday

(Adds details from Fed minutes, updates prices, table)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 3 (Reuters) - The dollar rallied on Wednesday
on upbeat U.S. manufacturing and construction data and after
minutes from the Federal Reserve's last policy meeting showed
the central bank remained on track to raise interest rates
several times this year.
Snapping a three-week losing streak, the dollar hit session
highs against the euro and yen after the minutes from the Fed's
Dec. 12-13 meeting. The dollar index posted its largest daily
gain in more than two weeks.
The Fed's minutes acknowledged the U.S. labor market's solid
gains and the expansion in economic activity, even as they
affirmed policymakers' worries about persistently low inflation.
That suggested the central bank will continue to pursue a
gradual approach in raising rates but could pick up the pace if
inflation accelerates.
Fed officials also discussed the possibility that the Trump
administration's tax cuts or easy financial conditions could
cause inflation pressures to rise, leading to some
dollar-buying, analysts said.
"The debate is the same. You have strong growth and low
unemployment on one side and surprisingly low inflation on the
other side," said Stephen Stanley, chief economist at Amherst
Pierpont Securities in Stamford, Connecticut.
"They have been taking a middle-of-the-road on their policy
approach, gradually raising interest rates and unwinding the
balance sheet. They will continue the same tack."
The dollar gained earlier in the session after data showed
U.S. construction spending rose 0.8 percent in November to an
all-time high of $1.257 trillion, driven by a surge in
investment in private residential and nonresidential projects.

At the same time, a U.S. manufacturing index as measured by
the Institute for Supply Management rose to 59.7 last month,
beating market expectations.
Still, analysts remained skeptical about the dollar's
near-term prospects, noting the expected rate hikes have been
priced in. Some also said modest U.S. inflation may encourage
the Fed to go slower in raising rates.
In late trading, the dollar bounced 0.3 percent to
92.18 after falling 2.5 percent over the last three weeks. The
dollar's 10 percent drop in 2017 was the largest annual decline
in 14 years.
The greenback also rose 0.2 percent versus the yen to 112.51
yen on Wednesday.
Friday's U.S. non-farm payrolls report should provide more
clarity about the outlook for interest rates this year.
The euro, meanwhile, slid 0.3 percent to $1.2016
after hitting a four-month high of $1.2081 on Tuesday, up
roughly 3 percent from a mid-December trough.
The single European currency has been supported by improving
prospects for the euro zone economy and expectations the
European Central Bank will wind down its bond-buying stimulus in

Currency bid prices at 2:53PM (1953 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Euro/Dollar EUR= $1.2016 $1.2057 -0.34% +0.17% +1.2068 +1.2003
Dollar/Yen JPY= 112.4900 112.2800 +0.19% -0.16% +112.6000 +112.1800
Euro/Yen EURJPY= 135.17 135.38 -0.16% -0.01% +135.4900 +134.8100
Dollar/Swiss CHF= 0.9769 0.9714 +0.57% +0.27% +0.9797 +0.9712
Sterling/Dollar GBP= 1.3513 1.3586 -0.54% +0.01% +1.3612 +1.3497
Dollar/Canadian CAD= 1.2537 1.2510 +0.22% -0.32% +1.2553 +1.2500
Australian/Doll AUD= 0.7837 0.7829 +0.10% +0.46% +0.7844 +0.7806
Euro/Swiss EURCHF= 1.1739 1.1714 +0.21% +0.43% +1.1762 +1.1701
Euro/Sterling EURGBP= 0.8892 0.8874 +0.20% +0.10% +0.8901 +0.8848
NZ NZD= 0.7100 0.7103 -0.04% +0.20% +0.7110 +0.7074
Dollar/Norway NOK= 8.1135 8.1263 -0.16% -1.14% +8.1452 +8.0929
Euro/Norway EURNOK= 9.7501 9.8014 -0.52% -1.00% +9.8058 +9.7315
Dollar/Sweden SEK= 8.1763 8.1665 -0.24% -0.31% +8.1886 +8.1594
Euro/Sweden EURSEK= 9.8260 9.8495 -0.24% -0.13% +9.8585 +9.8149

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Richard Leong; Editing by Dave Gregorio and Paul Simao)

First Published: 2018-01-03 03:42:35
Updated 2018-01-03 22:18:08

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