Dollar dips against basket of currencies in Europe

The dollar eased from a 8-month peak against a basket of currencies on Tuesday, falling against the yen and the Swiss franc as a rise in tension between Russia and Turkey spurred inflows into traditional safe haven currencies. The greenback shed 0.3 percent against the yen and 0.1 percent against the Swiss franc, after Turkish fighter jets shot down a Russian warplane near the Syrian border.
The incident triggered a "flight to safety" and underpinned the yen and the Swiss franc, both of which are sought during times of financial market stress. "(An) intensification (of tension) could at least prompt some lightening up of long dollar bets and support traditional safe havens like yen," Josh O'Byrne, strategist at Citi, said.
Sterling dipped after Bank of England's chief economist Andy Haldane said there were downside risks to inflation and growth while Governor Mark Carney reiterated a low interest rate environment is likely to remain. Earlier this month, he cooled expectations that the BoE will follow the Federal Reserve soon in raising rates. The dollar index was down 0.2 percent at 99.569, having hit a 8-month high of 100.00 struck on Monday. Volumes are likely to stay low given the approaching Thanksgiving holidays in the United States.
The index had fallen to as low as 98.735 late last week in what was considered a corrective phase following days of strong gains fuelled by prospects of tighter US monetary policy. Futures prices showed investors see a near-75 percent chance the Fed will hike rates next month, according to CME Group's FedWatch. "With odds increasing for a rate hike in December, the debate will shift to weather future rate hikes will be slow and gradual," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
"In that case, there may be less justification for holding long dollar positions and for the index, the air above 100 could get rarefied." In a letter to US consumer advocate Ralph Nader, Fed Chair Janet Yellen on Monday reiterated that the central bank should only gradually raise interest rates, boosting expectations that the bar for rate hikes in 2016 is rather high. The euro inched up to $1.0650 after touching a 7-month trough of $1.0592. The German IFO survey beat expectations, although traders sold the euro at higher levels.