* U.S. yields tumble as traders pare Fed rate-hike outlook
* U.S. trade deficit hits 10-year high; job growth slowing
* Risk aversion returns
(Updates rates, comments to U.S. market open; changes dateline,
By Saqib Iqbal Ahmed
NEW YORK, Dec 6 (Reuters) - The dollar weakened against major
peers on Thursday as U.S. Treasury yields tumbled and traders scaled
back expectations on the number of rate hikes the Federal Reserve
would implement amid weakening economic data and heightened market volatility.
The benchmark 10-year Treasury yield hit a three-month trough
of 2.845 percent. It was last down 7 basis points at 2.851 percent.
The euro was 0.33 percent higher against the dollar at $1.1382.
"I think it is essentially a yields story for the U.S. dollar
today," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
"The problem for the dollar is really a decline in U.S.
yields and fading Fed expectations," he said.
Fed policymakers are still widely expected to raise interest rates
again at their Dec. 18-19 meeting, but the market focus is on how many
rate hikes will follow in 2019.
Interest rate futures implied traders see no more than one rate
increase from the Fed in 2019, compared with expectations a month
earlier for possibly two rate hikes, according to CME Group's FedWatch program.
The dollar has been under pressure this week as an inversion in
part of the U.S. yield curve raised a red flag for a potential
Data on Thursday also weighed on the greenback. The U.S. trade
deficit jumped to a 10-year high in October as soybean exports dropped
further and imports of consumer goods rose to a record high,
suggesting the Trump administration's tariff-related measures to
shrink the trade gap likely have been ineffective. nL1N1Y91Q8]
"The widening in the trade deficit to $55.5 billion in
October, from $54.6 billion, was mainly driven by a further plunge in
exports to China, and suggests that net trade will once again be a
drag on GDP growth in the fourth quarter," Andrew Hunter, a U.S.
economist at Capital Economics, wrote in a note.
Separately, data showed private employers hired fewer workers than
expected in November, pointing to a moderation in the pace of job growth.
The dollar fell 0.8 percent against the Japanese yen after news of
the arrest in Canada of a top executive of Chinese tech giant Huawei
prompted fears of a flare-up in U.S.-China trade tensions.
The yen tends to benefit during geopolitical or financial stress
as Japan is the world's biggest creditor nation and there is an
assumption that Japanese investors will repatriate funds should a
Sterling was 0.43 percent higher on the day even as worry over
how a British Parliament vote on Prime Minister Theresa May's Brexit
deal next week remained in focus.
The Canadian dollar fell against its U.S. counterpart to a nearly
18-month low, as Bank of Canada Governor Stephen Poloz said the
economy was weaker than forecast and predicted low oil prices would
Graphic: World FX rates in 2018
(Reporting by Saqib Iqbal Ahmed; Editing by Dan Grebler)
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