FOREX-Dollar at two-month peak against yen on Fed taper view

Reuters

(In headline and first sentence, corrects to show that dollar

hit two-month peak vs yen, not a one-month peak)

* Dollar/yen nears 100 yen on Fed tapering expectations

* Sterling hits 2-month low vs dollar on UK inflation data

By Gertrude Chavez-Dreyfuss and Nick Olivari

NEW YORK, Nov 12 (Reuters) - The dollar advanced to a

two-month high against the yen on Tuesday as investors bet the

Federal Reserve would begin trimming its stimulus program sooner

than anticipated.

Speculation has grown that the Fed will start to reduce its

$85 billion-a-month bond-buying program sooner rather than later

after last Friday's release of better-than-expected U.S. jobs

numbers. A reduction in the Fed's asset purchases is positive

for the U.S. currency because it means there would be fewer

dollars in the financial system.

Atlanta Fed President Dennis Lockhart told reporters on

Tuesday that a tapering of the quantitative easing program

remains a possibility at the Dec. 17-18 policy meeting.

"There has been a broad strengthening of the U.S. dollar

because of the December taper talk," said Greg Moore, currency

strategist at TD Securities in Toronto.

Although investors were disappointed when the Fed did not

begin to slow the program in September and pushed out tapering

expectations until as far as April, they are now seeing data,

such as the nonfarm payrolls report, that could lead the Fed to

reduce accommodation in December.

The dollar was last up 0.6 percent at 99.70 yen, with

the peak of 99.79 yen, its strongest since Sept. 13.

The dollar faces resistance at 100 yen and at the September

peak of 100.62 yen.

The euro was up 0.2 percent at $1.3425 after rising

to a three-day high. The single currency was well above the

two-month low of $1.3295 hit on Thursday when it sold off

sharply after the European Central Bank's unexpected interest

rate cut.

The dollar index rose 0.1 percent to 81.161, edging

back toward a two-month peak of 81.482 struck on Friday.

POUND DIPS

Sterling slid to a two-month low against the dollar of

$1.5852 after UK inflation for October fell more than

expected.

However, the pound might get a lift from the central bank's

quarterly inflation report on Wednesday. Many in the market

expect the BoE to bring forward the point at which it sees UK

unemployment hitting 7 percent, the level at which it has said

it would consider raising rates.

Sterling was last down 0.6 percent at $1.5906.

Scandinavian currencies were among the biggest losers, with

the Swedish crown touching a 17-month low against the

euro after weak Swedish inflation data prompted talk of a rate

cut.

"The CPI print from Sweden was the 'nail in the coffin' for

getting a rate cut. Given that the market is not fully priced

for a cut, there is some more room for the Swedish crown to

fall," said Carl Hammer, chief currency strategist at SEB in

Stockholm.

He said SEB had changed their forecasts after the data and

now expected an easing of official borrowing costs in December,

adding that the Swedish crown could fall to 9 or 9.10 crowns per

euro.

The Norwegian crown also hit its lowest in nearly four years

against the euro on expectations the Norwegian Central

Bank would follow the European Central Bank and cut rates next

year.

(Editing by Andre Grenon)

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