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US dollar wallows near 1-month low, commodity currencies supported

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The US dollar wallowed near a one-month low against a basket of currencies on Friday, while currencies like the Australian and Canadian dollars were at two-month highs thanks to firmer commodity prices.

[TOKYO] The US dollar wallowed near a one-month low against a basket of currencies on Friday, while currencies like the Australian and Canadian dollars were at two-month highs thanks to firmer commodity prices.

The US dollar index against a basket of six major currencies was little changed at 92.659 after slipping 0.4 per cent overnight to 92.573, its lowest since Nov 27.

The index was on track to lose 0.5 per cent this month.

It will likely end the year down more than 9 per cent, its worst showing since 2003, and a Reuters poll showed it is expected to lose a bit more ground against other major currencies next year.

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Rebalancing of positions by market participants signals broad selling of the dollar, particularly the yen, towards the year's end, said Shin Kadota, senior strategist at Barclays in Tokyo.

"Seasonal trends in the currency market have shown that the dollar tends to weaken after Christmas through the first few days of the following year before eventually being bought back again," he said.

Many institutional investors close their books at the year-end, a deadline for taxation and reporting of performance, and such activity is seen leading to dollar selling pressure.

The US dollar was little changed at 112.880 yen. It had slipped to a nine-day low of 112.660 overnight, having gone as high as 113.750 on Dec 12.

The euro was steady at US$1.1941 and in close reach of a one-month high of US$1.1959 scaled the previous day. It has gained 0.3 per cent in December.

The common currency showed little reaction to Italy's announcement that it will hold an election on March 4, as such an outcome had been anticipated. The poll is expected to produce a hung parliament and possibly market turbulence in the euro zone's third largest economy.

The Australian dollar was effectively flat at US$0.7794 having surged to a two-month peak of US$0.7810 the previous day.

The Aussie was headed for a 3 percent monthly gain, lifted by a rise in the prices of commodities like iron ore and copper.

The Canadian dollar extended its overnight rally to touch C$1.2563 per US dollar, its strongest since Oct 20.

The loonie was on track to gain 2.5 per cent in December, boosted by a surge in crude oil.

REUTERS