Dollar set for weekly slide as trade, shutdown concerns weigh

By Rocky Swift TOKYO (Reuters) -The dollar remained on the back foot on Friday as global trade frictions and signs of weakness in the U.S. economy supported the case for more rate cuts by the Federal Reserve. The dollar index is set for its biggest weekly drop in almost three months as an extended shutdown of the U.S. government interrupted the publication of key economic data.  The yen rallied after Bank of Japan Governor Kazuo Ueda spoke about factors that could lead to a rate increase this month. Compounding concerns about trade, Fed independence and the U.S. shutdown are making the greenback vulnerable to the "debasement" trade, where investors seek assets that can't easily be devalued, said Pepperstone research strategist Dilin Wu. "It's really hard to find a bullish scenario for the dollar index," said Wu. "Instead of betting on any currency by a single sovereign credit, people are rushing into gold, cryptocurrency, and other assets as a risk hedge." The dollar index, which measures the greenback against a basket of currencies, edged 0.1% lower to 98.19, on course for a 0.7% slide this week – the biggest five-day retreat since late July. The yen gained 0.2% to 150.06 per dollar after earlier trading below the 150 line for the first time since October 6. BOJ Governor Ueda said in Washington on Thursday that the central bank remains ready to increase its key policy rate if the likelihood of its growth and price forecasts materializing increases. BOJ Deputy Governor Shinichi Uchida is due to speak later on Friday. The yen has been on the defensive since fiscal dove Sanae Takaichi was elected to head Japan's ruling Liberal Democratic Party earlier this month. But a vote to install her as prime minister was delayed after a split with the LDP's coalition partner. Reuters learned on Friday that Japan's lower house scheduling committee board has agreed to hold a parliamentary vote to select the next prime minister on October 21. The euro gained 0.2% to $1.1708, while sterling rose 0.1% to $1.3448. Fed Governor Christopher Waller said he is on board for another interest rate cut at the U.S. central bank's meeting later this month because of the mixed readings on the state of the job market. Stephen Miran, the Fed's newest governor and an economic adviser to U.S. President Donald Trump, reiterated support for more aggressive rate cuts at upcoming meetings than the one favored by some of his colleagues. Miran's temporary term expires at the end of January, while Fed Governor Lisa Cook remains in place as the case over Trump's attempt to fire her winds through the courts. The Fed's Beige Book offered little support to U.S. rates, pointing to emerging signs of economic weakness, including rising layoffs and reduced spending among middle and lower-income households. Trade frictions between Beijing and Washington continued to heat up overnight, with China accusing the U.S. of stoking panic over its rare earth controls, rejecting a White House call to roll back the curbs. In cryptocurrencies, bitcoin gained 1.1% to $109,000.98, while ether rose 1.8% to $3,923.04. (Reporting by Rocky SwiftEditing by Shri Navaratnam and Kim Coghill)

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