NEW YORK: The dollar fell on Friday, reducing its monthly gain against a basket of currencies, as traders who favored commodity-linked currencies booked profits on gains tied to the U.S. Federal Reserve's unexpected hint it may raise rates in December.
A rise in oil and other commodities prices lifted the Australian and New Zealand dollar. The latter also got a boost from improved domestic business confidence, which advanced for a second month on a rebound in dairy prices.
The dollar index, which measures the greenback against six major currencies, fell 0.3 percent to 96.995. For October, the dollar was up 0.6 percent, for its second straight monthly gain.
"The dollar had a good couple weeks with the European Central Bank surprise and the Fed surprise, but obviously there's still a little uncertainty about whether the Fed will be able to raise in December," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.
"I think the tendency was to take profit on those dollar positions that have done well in the past of couple weeks and reposition for next week," he said.
The U.S. dollar struggled after data showed U.S. consumer spending in September posted its smallest gain in eight months while inflation remained stalled.
The New Zealand dollar ended near its session high at $0.6777, up 1.2 percent on the day. The Aussie climbed 0.9 percent to $0.7129. Both currencies had fallen the previous three sessions.
The yen rose in the wake of Bank of Japan's decision to leave monetary policy unchanged, despite rate cuts from China and easing signals from the ECB. The dollar slipped 0.4 percent at 120.66 yen, while the euro fell 0.2 percent to 132.69 yen .
The greenback fell as low as 120.29 yen after the BoJ announcement, before reversing course radically on a report by the Nikkei newspaper that Japan's government is considering adding a 3 trillion yen ($24.77 billion) extra budget in preparation for the trans-Pacific trade pact.
The euro was also up modestly against the dollar, supported by an unexpected improvement in euro zone economic sentiment and signs of faster-than-expected inflation in Germany. It was last at $1.0993, up 0.2 percent.
Among other major currencies, the pound rose on bets the Bank of England could raise interest rates earlier than previously expected. Against the dollar, sterling was up 0.7 percent at $1.5418, retreating from an earlier gain of more than 1 percent. - Reuters