By Suryatapa Bhattacharya and Kosaku Narioka

British pound firms on U.S.-U.K. trade hopes

The dollar traded mostly higher against chief rivals Friday on expectations that any fiscal stimulus implemented by President-elect Donald Trump would lead to a faster pace of U.S. rate increases.

The dollar had sharply fallen Wednesday, when the surprising victory of the Republican candidate increased uncertainty over the economic and trade policies of the world's largest economy.

"Investors are less panicked now and starting to think about Trump's economic policies," said Yunosuke Ikeda, foreign-exchange strategist with Nomura Securities in Tokyo.

The dollar was at Yen106.31, compared with Yen106.79 late Thursday in New York. The dollar hit Yen106.95 overnight, the highest level since July 21.

The euro was at $1.0874 versus $1.0890.

The dollar sputtered against its U.K. counterpart, however. The British pound was at $1.2619, compared with $1.2554.

The pound gained on hopes for bilateral trade under a new U.S. administration after Donald Trump's trade adviser suggested the U.S. would reach a trade deal with the U.K. before the rest of Europe.

The dollar rose in part because of an unwinding of the positions to hedge against drops in the U.S. currency that some market participants had built up ahead of the election's outcome, some analysts said.

The prospect of a fiscal-stimulus program from Trump raised expectations that the U.S. economy will continue to improve and that the Federal Reserve will raise rates in December and then continue a tightening path. Higher interest rates on dollar-denominated assets tend to attract investmentfrom abroad.

Read:Trump stock-market rally reflects expectations for new era of fiscal stimulus (http://www.marketwatch.com/story/trump-stock-market-rally-signals-new-era-of-huge-government-spending-2016-11-10)

Despite the possibility that U.S. fiscal stimulus could bolster the nation's economy and buoy inflation expectations, leading to further rate increases, questions have arisen over what sort of policies Trump would deliver.

Ikeda said the Fed would be unlikely to raise rates if Trump ends up creating "supply-side shocks" to the economy, such as imposing higher tariffs and scrapping trade agreements.

(END) Dow Jones Newswires

November 11, 2016 07:02 ET (12:02 GMT)

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