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Dollar gains before Fed meeting, inflation data

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By Karen Brettell

NEW YORK (Reuters) – The dollar bounced off two-week lows on Friday as investors awaited inflation data and the Federal Reserve’s interest rate decision next week for any new clues on how high the U.S. central bank is likely to hike rates.

The Fed is expected to hold rates steady at the conclusion of its June 13-14 meeting, but is likely to also maintain a hawkish tone and indicate that a hike is likely in July as inflation remains above its 2% target.

“They still think they need to do more, and also I would suspect they will continue to discourage expectations of policy easing,” Vassili Serebriakov, an FX strategist at UBS in New York, said.

The Fed is expected to revise higher its “dot plot” of policymaker’s rate expectations and their inflation projections, “so in that sense, I think the Fed will remain hawkish”, Serebriakov said.

Inflation data on Tuesday is expected to show headline inflation rose at an annual rate of 4.1% in May, while core prices gained 5.2%.

The euro was last down 0.08% against the dollar at $1.0774. The greenback gained 0.32% to 139.37 yen.

The dollar index, which measures the currency against six major peers, edged up 0.07% to 103.37.

The greenback is largely range bound as investors wait on clearer signs of whether the economy will remain strong and inflation elevated, or if it is headed towards a contraction.

Data on Thursday showed that the number of Americans filing new claims for unemployment benefits surged to the highest level in more than 1-1/2 years last week.

That came after jobs data for May last Friday showed employers added 339,000 jobs during the month, more than expected, but that the unemployment rate rose to a seven-month high of 3.7%.

“This jump put jobless claims close to a two-year high and has been read by markets as a clear sign of coming weakness in the U.S. economy and a more-hesitant-to-hike Fed,” CaxtonFX strategist David Stritch said.

The European Central Bank and Bank of Japan are also due to meet next week. The ECB is expected to raise euro zone rates by 25 bps to 3.50% on Thursday, while the BOJ is likely to leave rates unchanged after its two-day meeting on Friday.

The Bank of Canada and the Reserve Bank of Australia jolted markets earlier this week by raising interest rates to tackle stubborn inflation.

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Currency bid prices at 9:40AM (1340 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 103.3700 103.3200 +0.07% -0.116% +103.5600 +103.3100

Euro/Dollar $1.0774 $1.0782 -0.08% +0.54% +$1.0786 +$1.0757

Dollar/Yen 139.3650 138.9300 +0.32% +6.31% +139.7200 +138.7650

Euro/Yen 150.14 149.78 +0.24% +7.02% +150.4300 +149.6500

Dollar/Swiss 0.9014 0.8992 +0.26% -2.50% +0.9024 +0.8985

Sterling/Dollar $1.2585 $1.2558 +0.22% +4.06% +$1.2586 +$1.2536

Dollar/Canadian 1.3333 1.3359 -0.18% -1.58% +1.3371 +1.3317

Aussie/Dollar $0.6738 $0.6716 +0.29% -1.19% +$0.6740 +$0.6694

Euro/Swiss 0.9710 0.9692 +0.19% -1.87% +0.9718 +0.9685

Euro/Sterling 0.8559 0.8584 -0.29% -3.21% +0.8590 +0.8561

NZ $0.6135 $0.6096 +0.66% -3.36% +$0.6139 +$0.6087

Dollar/Dollar

Dollar/Norway 10.7790 10.9020 -1.02% +9.96% +10.9110 +10.7590

Euro/Norway 11.6148 11.7314 -0.99% +10.68% +11.7690 +11.5938

Dollar/Sweden 10.8226 10.7937 +0.12% +3.99% +10.8593 +10.7828

Euro/Sweden 11.6562 11.6428 +0.12% +4.54% +11.6877 +11.6232

(Additional reporting by Amanda Cooper in London; Editing by Jan Harvey)

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