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Dollar slips from nearly 4-month high on rate hike uncertainty

[NEW YORK] The US dollar slipped on Monday from a nearly four-month high touched Friday after comments from the US Federal Reserve's vice chairman stoked uncertainty over whether the US central bank would hike rates in September.

Fed Vice Chairman Stanley Fischer told Bloomberg TV that the global deflationary trend "bothers" the Fed, but is one of many factors the US central bank is watching.

Analysts said his comments on the whole cast some doubt on the likelihood that the Fed will hike rates for the first time in nearly a decade next month.

"What we're seeing right now in the market is that reflection of the uncertainty surrounding the timing of the first Fed hike," said Sireen Harajli, a foreign exchange strategist at Mizuho Corporate Bank in New York.

The dollar index, which measures the greenback against a basket of major currencies, hit its highest level in nearly four months on Friday of 98.334 after a solid US jobs report for July supported expectations that the Fed would hike in September.

While doubts put a damper on the Fed's rally, analysts said the dollar index remained not far from Friday's high since the Fed is still leaning toward hiking rates while central banks in Europe and Japan have loose monetary policies firmly in place.

Analysts also said that July US retail sales data, due Thursday, could reflect on the timing of the Fed's first rate hike.

The Australian and New Zealand dollars pared earlier losses, but each remained down on the day after soft weekend data on China's economy. The commodity-related currencies fell given those countries' strong trade ties with China.

The euro hit 1.08414 francs, its highest against the Swiss currency since the Swiss National Bank shocked markets by scrapping a 1.20 francs per euro cap on January 15. The dollar hit its highest level against the franc since March 20 at 0.98910 franc.

The franc's weakness could be in response to the SNB quietly intervening into markets and buying euros to weaken the franc, said Boris Schlossberg, managing director at BK Asset Management in New York.

The dollar index was last down 0.04 per cent at 97.528. The euro was last up 0.05 per cent against the dollar at $1.09710. The dollar was last up 0.31 per cent against the yen at 124.575 yen.

REUTERS