SINGAPORE Reuters - The dollar was close to a three-month low and was on track for a weekly loss on Friday as the possibility of the Federal Reserve slowing monetary policy tightening as early as December dominated investors' minds and kept the mood buoyant.
Most currencies extended their gains against a softer dollar before paring them slightly in early Asia trade, but trading was thin overnight due to the Thanksgiving holiday in the United States.
The pound was more than 0.5% overnight and was close to its three-month high of $1.2153 hit in the previous session and on track for a nearly 2% weekly gain.
The Japanese yen jumped by 0.7% overnight, and last bought 138.60 per dollar.
Minutes from the November meeting of the Fed earlier this week showed that a large majority of policymakers agreed that it would likely be appropriate to slow the pace of interest rate hikes - remarks that sent the greenback tumbling.
The Fed's aggressive interest rate hikes and market expectations of how high the central bank could take them have been a big factor in the surge this year, and has been a big factor in the dollar's 10% surge this year.
We had a third day of positive risk sentiment. Ray Attrill, head of FX strategy at National Australia Bank said that the U.S. dollar is keeping it subdued.
The U.S. dollar index was at 105.94 against a basket of currencies, testing its three-month trough of 105.30 last week. It was going to have a weekly loss of nearly 1%.
A survey showing German business morale rose further than expected in November also aiding risk sentiment.
The accounts of the October meeting show that the European Central Bank ECB policymakers fear that inflation is getting into the euro zone. Markets are expecting a more modest, 50 bp move at the December meeting.
The euro was close to $1.0481, its highest level in four months last week, but it was 0.06% lower at $1.04045, which was its highest level in over four months.
We have the euro zone inflation numbers next week, so I think they are going to be a big test of market pricing if we get another upside surprise on that, then I think that would bring 75 bp back to the agenda, said Attrill.
The Aussie was down 0.17% to $0.6753 after rising more than 0.4% overnight. The kiwi fell 0.19% to $0.6252, but it was not far off its three month peak in the previous session.
The Reserve Bank of New Zealand's 75 bp rate hike and its hawkish rate outlook helped to boost the New Zealand dollar's weekly gain of more than 1.5%.
In China, markets were watching an impending cut in banks' reserve requirement ratio RRR China will use timely cuts in banks' RRR, along with other monetary policy tools to keep liquidity reasonably ample, state media quoted a cabinet meeting as saying.
The PBoC People's Bank of China is expected to cut RRR by 25 bp for most banks in the next couple of weeks or even days, according to analysts at Nomura.
The RRR is likely to have only a limited impact, as we believe that the real hurdle for the economy lies in local officials' more zealous implementation of Covid restrictions rather than insufficient loanable funds. The Chinese offshore currency was at 7.1759 per dollar last 0.1% lower.