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Dollar tumbles vs euro as Fed rate hike prospects fade
[NEW YORK] The dollar tumbled against the euro on Friday as investors weighed fading prospects of a Federal Reserve interest rate increase even as Fed officials kept a hike by year-end in play.
Two voting members of the Federal Open Market Committee, the Fed's policy arm, William Dudley, president of the New York Fed, and Dennis Lockhart, president of the Atlanta Fed, said they expected the hike would come this year.
Mr Dudley, in a CNBC television interview, said that a rate hike was "possible in October." The FOMC has two meetings left this year, on October 27-28 and December 16-17.
Mr Dudley said that, based on his forecast, rates would rise before the end of the year, a timing envisioned by Fed Chair Janet Yellen.
Mr Lockhart, in a speech, acknowledged that the past few weeks "have provided a bit of a roller-coaster ride," including last Friday's weak September jobs report that led some people to lower the odds of a liftoff in October and December.
"I believe the economy remains on a satisfactory track, and, speaking for myself, I see a liftoff decision later this year at the October or December FOMC meetings as likely appropriate," he said.
The dollar sank to a three-week low against the euro, trading at US$1.1359 to the single currency.
"The US dollar is down while broader market sentiment is favourable after yesterday's generally dovish Fed minutes," said Eric Viloria of Wells Fargo. Equities in particular were buoyed by the idea that the ultra-low rate environment would persist.
"Policymakers noted that downside risks to growth and inflation increased, although many officials still expected interest rate lift-off this year," Mr Viloria said.