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US dollar posts 2016 gain on Trump victory, Fed forecasts

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The US dollar slipped on Friday but notched its fourth straight year of gains against a basket of major currencies.

[NEW YORK] The US dollar slipped on Friday but notched its fourth straight year of gains against a basket of major currencies.

The US dollar index, which measures the greenback against a basket of six major rivals, gained about 3.7 per cent for the year.

The index rose about 7.1 per cent during the fourth quarter, more than half that gain coming since the Nov 8 US presidential election on expectations that US President-elect Donald Trump's plan to boost fiscal stimulus would benefit the currency. A faster projected pace of rate hikes from the Federal Reserve next year also contributed.

Several analysts have said the US dollar's uptrend remains intact next year, but noted the risk of US dollar weakness given doubts surrounding how much US dollar appreciation a Trump White House will tolerate.

Market voices on:

"Much depends on how the Trump presidency and the Chinese economy work out," said Marshall Gittler, chief market analyst for retail broker FX Primus.

For the day, the US dollar index was last off 0.38 per cent at 102.290, down from a 14-year high of 103.65 hit on Dec 20, and was up 0.18 per cent against the yen at 116.74 yen. The greenback was still set to post its first yearly loss in five against the Japanese currency, of about 2.9 per cent.

Sterling, which fell roughly 16.2 per cent against the US dollar to mark its worst year since 2008 on worries over Britain's June 24 "Brexit" vote to leave the European Union, was last up 0.62 per cent at US$1.2340.

Sterling bore the brunt of concerns this year over Britain's trade policy with Europe which flared up following the Brexit vote, said Jason Leinwand, founder and chief executive of FirstLine FX in Randolph, New Jersey.

The euro was up 0.39 per cent against the US dollar at US$1.0529, but was set to fall 3 per cent for the year to notch its third straight yearly loss.

The US dollar posted sizable gains this year against the Mexican peso and the Chinese yuan of 20.6 per cent and 7 per cent, respectively.

The peso suffered from Mr Trump's proposals to build a border wall and rewrite trade agreements with Mexico, while the yuan has been pressured by worries about slowing Chinese economic growth.