*

Dollar falls as investors fret about weakening U.S.

economy

*

Markets split on Fed cut in December

*

Sterling slips after FT report Starmer and Reeves ditching

plans

to raise income tax rates

(Updates to Asia afternoon)

By Rae Wee and Tom Westbrook

SINGAPORE, Nov 14 (Reuters) - The dollar headed for a

weekly fall on Friday as investors trimmed positions while

waiting to assess a backlog of U.S. data following the

government's reopening.

Traders sold the greenback despite higher yields and

expectations for a Federal Reserve rate cut next month receding.

The move came alongside a selloff in U.S. equities and bonds,

which spilled over into Asian share markets on Friday.

"There's a whiff of 'sell America' back in the air," said

Ray Attrill, head of FX research at National Australia Bank

(NAB).

More Fed officials signalled caution over further easing

overnight, citing worries about inflation and signs of relative

stability in the labour market.

However, a slightly more hawkish Fed tone failed to lift the

dollar, which fell to a two-week low against the euro in

the previous session. The common currency bounced back above the

$1.16 mark and traded 0.1% higher at $1.1644.

The Swiss franc similarly held near an over

three-week high and steadied at 0.7919 per dollar. Against a

basket of currencies, the greenback languished near a

two-week low at 99.14.

The dollar index was headed for a weekly fall of 0.4%.

"Starting from next week, we're going to get a lot of

economic data from the U.S., and we think it's going to be

pretty bad," said Joseph Capurso, Commonwealth Bank of

Australia's head of foreign exchange international and

geoeconomics.

While that would normally fuel expectations of more

aggressive rate easing to shore up a weakening economy, Capurso

said the impending patchy data releases may explain why Fed

funds futures have moved the other way.

The White House indicated the U.S. unemployment rate for

October may never be available, since it is dependent on a

household survey that was not conducted during the shutdown.

"When you're in the fog, you drive slower... when you don't

know what's going on in the economy, maybe you slow down your

cuts," said Capurso.

While investors see just over a 50% chance of a

25-basis-point cut in December, the odds for such a move in

January are almost fully priced. Rate expectations for 2026 have

also hardly moved.

It was a busy session in Asia for currencies, with outsized

moves in the British pound and the South Korean won

, while the onshore yuan also rose to its

strongest level in over a year.

Sterling fell 0.3% to $1.3152, failing to sustain its

0.45% overnight gain against a weaker dollar.

Its move lower came after a report by the Financial Times

that British Prime Minister Keir Starmer and Finance Minister

Rachel Reeves have abandoned plans to raise income tax rates,

marking a sharp shift just weeks ahead of the November 26

budget.

"If it means fiscal tightening won't be as drastic as

expected that might be less bad for the economy, but foreign

investors in the gilt market will be further troubled by what it

means for the underlying fiscal position and that will justify

the knee-jerk negative reaction to the story," said NAB's

Attrill.

The South Korean won jumped 1% against the dollar on

Friday after the country's foreign exchange authorities vowed to

take measures to stabilise a wobbly currency and were suspected

of dollar-selling market intervention.

The battered yen meanwhile found some reprieve thanks

to the pullback in the dollar, though remained pinned near a

nine-month low hit earlier this week.

It firmed slightly to 154.51 per dollar, but remained on

track for a fall of 0.7% for the week.

Down Under, the Australian dollar was nursing losses,

after falling in the previous session owing to broad risk-off

sentiment from expectations of higher-for-longer U.S. rates.

The Aussie was up 0.11% at $0.6538, while the New Zealand

dollar similarly rose 0.6% to $0.5687.

The kiwi was helped by data which showed manufacturing

activity expanded in October, while the Reserve Bank of New

Zealand also said it will ease restrictions on mortgage

loan-to-value ratios from December 1.

In China, the onshore yuan peaked at a one-year

high of 7.0908 per dollar, with traders citing dollar-selling by

local exporters after the currency pair breached a key

threshold.

Data on Friday showed China's factory output and retail

sales grew at their weakest pace in over a year in October,

while new home prices also fell at the fastest monthly pace in a

year last month.

(Reporting by Rae Wee; Editing by Sam Holmes, Lincoln Feast and

Shri Navaratnam.)