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FOREX-Dollar gives back gains, strong wage growth complicates Fed policy

      Graphic: World FX rates

 (Adds comments from Fed officials, updates prices)
    By Karen Brettell
       NEW YORK, Dec 2 (Reuters) - The dollar dipped on Friday
as a Federal Reserve official said rate hikes are likely to slow
and as investors took profits from earlier gains after jobs data
and wage inflation were surprisingly strong in November and
muddied the outlook for how hawkish the U.S. central bank will
    The greenback initially jumped after data showed that
employers added 263,000 jobs in November, well above estimates
of 200,000.
    "Stronger-than-expected hiring can buy the Fed more time to
stay aggressive," Joe Manimbo, senior market analyst at Convera
in Washington, said.
    Investors zeroed in on an increase in average hourly
earnings by 0.6% in the month, above expectations for a 0.3%
gain, and the participation rate, which declined to 62.1%, Marc
Chandler, chief market strategist at Bannockburn Global Forex in
New York, said.
    "Both of those measures reflect more than the nonfarm
payroll growth number the tightness of the labor market," he
    But the dollar gave back gains as investors took profits
before the weekend and as Fed officials spoke on the outlook.
    Chicago Fed President Charles Evans said that the pace of
increases is likely to slow, but added that the U.S. central
bank will likely need to raise borrowing costs to a "slightly
higher" peak than envisioned in forecasts from September.

    Richmond Fed President Thomas Barkin also said the United
States is likely in a sustained period in which there will
remain a shortage of workers, complicating the Fed's aim of
getting labor demand back into balance.
    The dollar index was last down 0.13% on the day
against a basket of currencies at 104.50, and the euro
gained 0.10% to $1.0537, the highest since June 28.
    The greenback slipped 0.71% on the day against the Japanese
yen to 134.38. It earlier reached 133.62 yen, the
weakest since August 16.
    The greenback had tumbled after Fed Chairman Jerome Powell
said on Wednesday that it was time to slow rate hikes, raising
hopes that the Fed was closer to the end of its tightening
    Data on Thursday also showed that inflation is moderating,
with the personal consumption expenditures (PCE) price index
rising 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.
    "Markets are really buying into the pivot story from the
Fed," ING FX strategist Francesco Pesole said.
    The next major U.S. economic indicator will be consumer
price inflation data due on Dec. 13, one day before the Fed
concludes its two-day meeting.
    The U.S. central bank is expected to increase rates by an
additional 50 basis points at the meeting. Fed funds futures
traders are now pricing for the Fed's benchmark rate to peak at
4.92% in May.
    Currency bid prices at 3:11PM (2011 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 104.5000       104.6600    -0.13%         9.238%        +105.5900   +104.3600
 Euro/Dollar                  $1.0537        $1.0526     +0.10%         -7.32%        +$1.0545    +$1.0430
 Dollar/Yen                   134.3800       135.3300    -0.71%         +16.72%       +135.9750   +133.6200
 Euro/Yen                     141.58         142.42      -0.59%         +8.66%        +142.4700   +140.7800
 Dollar/Swiss                 0.9374         0.9370      +0.04%         +2.76%        +0.9439     +0.9326
 Sterling/Dollar              $1.2295        $1.2264     +0.27%         -9.08%        +$1.2300    +$1.2137
 Dollar/Canadian              1.3458         1.3433      +0.18%         +6.43%        +1.3520     +1.3422
 Aussie/Dollar                $0.6811        $0.6812     +0.00%         -6.29%        +$0.6836    +$0.6743
 Euro/Swiss                   0.9877         0.9857      +0.20%         -4.74%        +0.9878     +0.9824
 Euro/Sterling                0.8567         0.8589      -0.26%         +1.99%        +0.8608     +0.8556
 NZ                           $0.6410        $0.6372     +0.61%         -6.33%        +$0.6413    +$0.6330
 Dollar/Norway                9.7735         9.7265      +0.67%         +11.15%       +9.8630     +9.7420
 Euro/Norway                  10.2989        10.2368     +0.61%         +2.86%        +10.3206    +10.2293
 Dollar/Sweden                10.3208        10.2912     +0.33%         +14.46%       +10.4659    +10.2891
 Euro/Sweden                  10.8752        10.8390     +0.33%         +6.27%        +10.9202    +10.8382
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