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FOREX-Dollar index lowest since August as inflation moderates

      Graphic: World FX rates

 (Adds quotes, details; updates prices; changes byline; previous
    By Karen Brettell
       NEW YORK, Dec 1 (Reuters) - The U.S. dollar dipped to
16-week lows against a basket of major currencies on Thursday
after data showed that U.S. consumer spending increased solidly
in October, while inflation moderated, adding to expectations
that the Federal Reserve is closer to reaching a peak in
interest rates.
    The move comes after Fed Chairman Jerome Powell on Wednesday
said that it was time to slow rate hikes, noting that "slowing
down at this point is a good way to balance the risks."
    Investors took comfort from the comments, even as Powell
also said that rates would still go higher and that controlling
inflation "will require holding policy at a restrictive level
for some time."
    "We're seeing the consumer is still keeping up with their
spending, and in addition to that continuing claims are rising.
So, we're going to probably start to see that unemployment rate
tick higher and I think this is going to support the idea that
we're going to see the Fed is close to done with their
tightening cycle," said Edward Moya, senior analyst at OANDA in
New York.
    "The markets are going to be a little bit more expecting
that yields are going to continue to come down and also that's
going to be a weaker dollar," Moya added.
    Thursday's data showed that consumer spending, which
accounts for more than two-thirds of U.S. economic activity,
jumped 0.8% after an unrevised 0.6% increase in September.
    The personal consumption expenditures (PCE) price index rose
0.3 after advancing by the same margin in September. In the 12
months through October, the PCE price index increased 6.0% after
advancing 6.3% in September.
    The dollar index fell as low as 104.82 against a
basket of currencies, the lowest since August 11 and the euro
 reached $1.05175, the highest since June 29. The
greenback fell as low as 135.75 yen, the weakest since
August 19. Sterling also reached $1.22890, the highest
since June 27.
    Fed funds futures traders are now pricing for the Fed's
benchmark rate to peak at 4.91% in May, up from 3.83% now. The
traders had priced for a top of over 5% before Powell's comments
on Wednesday.
    Antipodean currencies also rose on expectations that China
will ease its strict COVID restrictions.
    China is set to announce an easing of its COVID-19
quarantine protocols in the coming days and a reduction in mass
testing, sources told Reuters, a marked shift in policy after
anger over the world's toughest curbs fueled widespread
    The Aussie reached $0.68400, the highest since
September 13 and the kiwi hit $0.63995, the highest
since August 15.
    Currency bid prices at 9:50AM (1450 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 104.7400       105.7800    -0.97%         9.489%        +105.9000   +104.7400
 Euro/Dollar                  $1.0520        $1.0409     +1.07%         -7.46%        +$1.0524    +$1.0393
 Dollar/Yen                   135.9300       138.1100    -1.56%         +18.09%       +138.1100   +135.7500
 Euro/Yen                     143.00         143.65      -0.45%         +9.75%        +143.7600   +141.9200
 Dollar/Swiss                 0.9380         0.9457      -0.79%         +2.86%        +0.9460     +0.9380
 Sterling/Dollar              $1.2291        $1.2058     +1.94%         -9.11%        +$1.2294    +$1.2056
 Dollar/Canadian              1.3412         1.3410      +0.04%         +6.10%        +1.3450     +1.3395
 Aussie/Dollar                $0.6836        $0.6789     +0.71%         -5.95%        +$0.6840    +$0.6753
 Euro/Swiss                   0.9867         0.9839      +0.28%         -4.84%        +0.9886     +0.9823
 Euro/Sterling                0.8557         0.8626      -0.80%         +1.87%        +0.8642     +0.8554
 NZ                           $0.6396        $0.6297     +1.56%         -6.56%        +$0.6400    +$0.6294
 Dollar/Norway                9.7250         9.8500      -1.07%         +10.62%       +9.8480     +9.7450
 Euro/Norway                  10.2283        10.2355     -0.07%         +2.15%        +10.2644    +10.2289
 Dollar/Sweden                10.3236        10.4905     -0.59%         +14.48%       +10.5228    +10.3203
 Euro/Sweden                  10.8575        10.9219     -0.59%         +6.09%        +10.9515    +10.8388
 (Additional reporting by Alun John in London
Editing by Nick Zieminski)

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