*
Dollar retreats from two-year high, but set for weekly
gain
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US government faces partial shutdown if spending bill not
passed
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Euro edges higher but set for third-straight weekly loss
(Updates prices throughout, adds analyst comments)
By Chibuike Oguh
NEW YORK, Dec 20 (Reuters) - The U.S. dollar pulled
back from a two-year high on Friday, but was heading for its
third-straight week of gains, with data showing a slowdown in
inflation two days after the Federal Reserve cut interest rates
and indicated inflation was stubborn enough to scale back cuts
in 2025.
The dollar was down 0.72% against a basket of six other
currencies at 107.64 after spiking as high as 108.54 -
its highest level since November 2022. It was set to end the
week 0.72% higher.
Commerce Department data showed the personal consumption
expenditures price index - the Fed's preferred inflation gauge -
rose 0.1% in November after an unrevised 0.2% gain in October.
But in the 12 months through November, the PCE price index
advanced 2.4%, compared with a 2.3% increase in the year to
October.
The Fed cut interest rates by 25 basis points on Wednesday,
with officials indicating that fewer cuts were coming in 2025 as
inflation remained above the targeted range despite its recent
downward trajectory.
The yield on benchmark U.S. 10-year notes fell
6.2 basis points to 4.51%, after hitting a 6-1/2-month high
following the Fed's rate decision.
"The inflation numbers today were more benign than feared;
the Fed tilted its focus back towards inflation in this week's
meeting, and then the numbers weren't so worrisome," said Adam
Button, chief currency analyst at ForexLive.
"I think the market heard the words of the Fed and got
worried about inflation. But then the numbers show that it's
still slowing and certainly not at worrisome levels.
The U.S. government will begin a partial shutdown if
Congress does not extend a deadline for a spending bill backed
by President-elect Donald Trump to pass by midnight on Friday.
The bill failed to pass in the House of Representatives on
Thursday.
The dollar weakened 0.79% to 0.892 Swiss francs,
on track for a weekly loss.
The euro edged higher after dipping to a one-month low of
$1.03435 on the session, on track for its
third-straight week of losses, weighed down partly by Trump's
comments that the European Union must purchase more U.S. oil and
gas to make up for its "tremendous deficit" with the world's
largest economy, or face tariffs. It was last up 0.76% at
$1.044175.
The dollar dropped to a five-month low of 157.93 Japanese
yen after the Bank of Japan left interest rates
unchanged. It was last down 0.89% at 156.01 yen.
Sterling dipped to a one-month low of $1.2475 but
was last up 0.77% at $1.25990, still on track for a third
straight week of losses. The Bank of England kept interest rates
on hold on Thursday.
The dollar weakened 0.18% to 7.295 Chinese yuan on
the offshore market. The Australian dollar weakened 0.43%
to $0.6263, while New Zealand's dollar strengthened 0.53%
to $0.566.
"You basically have an interest rate play between
Wednesday's Fed meeting and it's not so much what they did, but
the catalyst was the change in the economic projections for the
Fed funds rate next year," said Joseph Trevisani, senior analyst
at FXStreet.com.
"The market is seeing that the Fed is pulling back. I've
long thought they would pause in January. I'm pretty sure they
will."
Currency bid prices at 20 December? 06:57 p.m. GMT
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid
Dollar index 107.66 108.43 -0.7% 6.20% 108.54 107.58
Euro/Dollar 1.0438 1.0364 0.72% -5.43% $1.0445 $1.0344
Dollar/Yen 156.09 157.335 -0.77% 10.69% 157.875 155.975
Euro/Yen 162.93? 163.13 -0.12% 4.69% 163.66 162.36
Dollar/Swiss 0.892 0.8987 -0.76% 5.97% 0.899 0.8917
Sterling/Dollar 1.2595 1.2503 0.76% -1.01% $1.2613 $1.2475?
Dollar/Canadian 1.4361 1.4399 -0.25% 8.35% 1.4435 1.4336
Aussie/Dollar 0.6263 0.6238 0.46% -8.1% $0.6274 $0.6215
Euro/Swiss 0.9308 0.9312 -0.04% 0.24% 0.9319 0.9287
Euro/Sterling 0.8284 0.8287 -0.04% -4.43% 0.8313 0.8272
NZ Dollar/Dollar 0.566 0.5631 0.55% -10.4% $0.5672 0.5615
Dollar/Norway 11.3073? 11.4263 -1.04% 11.57% 11.4726 11.3077
Euro/Norway 11.8051 11.856 -0.43% 5.18% 11.892 11.8072
Dollar/Sweden 11.0032 11.0238 -0.19% 9.3% 11.0608 10.9884
Euro/Sweden 11.4869 11.4283 0.51% 3.25% 11.4929 11.431
(Reporting by Chibuike Oguh, Karen Brettell, Rae Wee and Greta
Rosen Fondahn; Editing by Jacqueline Wong, Jamie Freed, Hugh
Lawson, William Maclean, Kevin Liffey and Rod Nickel)
Line of Credit 
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