Dollar pulls back amid questions over pace of expected Fed hikes

The dollar declined on Tuesday in Asia, weighed on uncertainty over the pace of anticipated U.S. interest rate increases.

Following comments made by senior Federal Reserve officials pointing to rate increases in December, market participants have largely factored in the December lift-off. They also expect a few more increases next year.

Still, uncertainty remains over the pace rates will rise given the U.S.’s tame inflation outlook. Recent attacks by extremists in Paris and elsewhere could also have negative implications for global economic growth, Tokyo dealers say.

“We are still trying to figure out how fast the pace of rate increases might be,” said Michiyoshi Kato, senior vice president of forex sales at Mizuho Bank.

He said some participants were trimming bets on the dollar’s ascent ahead of the Thanksgiving holiday.

The dollar USDJPY, -0.09% was at ¥122.72, compared with ¥122.83 late Monday in New York, according to EBS. The euro EURUSD, +0.0188% was at $1.0628, compared with $1.0636. The British pound GBPUSD, +0.1918% was at $1.5132 from $1.5123.

Meanwhile, the increased prospect for the Federal Reserve’s rate increases in December may make the European Central Bank reluctant to act next month, analysts say.

ECB President Mario Draghi has indicated the ECB is prepared to take additional easing action at its Dec. 3 policy meeting.

Still, some say the incentive for more stimulus may not be as great as before, given the recent weakening of the euro and expectations of further declines if the Fed raises rates at its next meeting on Dec. 15-16.