LONDON, Dec 9 (Reuters) - The dollar edged lower against
major currencies on Friday as concerns resurfaced about the
health of the U.S. economy, and ahead of producer inflation data
later in the day and a Federal Reserve meeting on interest rates
After a lull in market-moving news, investors are looking
towards rate decisions next week - including from the Fed, the
European Central Bank and the Bank of England.
Markets are betting all three will slow the pace of their
rate hikes, with 0.5 percentage point increases across the
board, while still trying to check inflation.
Volatility levels for major currencies have retreated
towards their long-run average, currency analysts at MUFG said
in a note, as markets start to price in the prospect of peak
interest rates early next year.
"Part of the decline in volatility we would put down to
market pricing indicating most central banks are approaching
terminal rates suggesting Q1 will be the quarter when most
central banks will pause after roughly 12 months of tightening,"
the note said.
U.S. data on producer price inflation due at 1330 GMT will
be closely-watched for signs price rises are cooling, with
consumer price data set to follow on Tuesday.
Data on Thursday showed a moderate increase in U.S. jobless
claims, adding to investor nerves about the outlook.
The dollar index - which measures the greenback against a
basket of six major currencies - was last down 0.1% at 104.680.
The index remains up about 9.5% for the year so far, but is
down more than 6% for the fourth quarter, reflecting lowered
expectations for inflation and interest rates.
Markets are pricing in a 93% chance that the Fed increases
its benchmark rate by 0.5 percentage points at its meeting on
Dec. 14, according to Refinitiv data, with a 7% chance of a 0.75
percentage point hike.
Against the greenback, the euro was flat at
$1.05580, close to its six-month peak hit at the start of the
week and on track for a third straight week of gains.
Sterling edged up 0.2% on the day to $1.22680, not
far off Monday's six-month high of $1.2345, as the government
announced reforms designed to maintain London as one of the most
competitive financial hubs in the world.
The Japanese yen jumped as much as 0.7%, and was
last up 0.6% to 135.850.
(Reporting by Iain Withers, Additional reporting by Rae Wee in
Singapore, Editing by Crispian Balmer and Barbara Lewis)