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Dollar index set for biggest weekly drop in three months

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Investors turn to gold, cryptocurrency as dollar weakens

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Fed's Beige Book highlights rising layoffs, reduced

spending

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Fed officials support more rate cuts amid economic

weakness

By Rocky Swift

TOKYO, Oct 17 (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 blocked the publication of key economic data.

The yen held on to gains 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, was little changed at 98.23 and

remained on course for a 0.6% slide this week - the biggest

five-day retreat since late July.

Against the Japanese yen, the dollar weakened 0.2% to

150.12.

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 euro added 0.1% at $1.1701, while sterling

also tacked on 0.1% to $1.3446.

Fed Governor Christopher Waller said he is on board with

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

advisor 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 seat 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 heated 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 0.6% to

$108,534.66, and ether rose 1.8% to $3,919.71.