Dollar falls against franc, pares gains vs yen on Deutsche Bank concerns

United States one dollar bills seen on a light table at the Bureau of Engraving and Printing in Washington

By Sam Forgione

NEW YORK (Reuters) – The U.S. dollar hit a more than one-month low against the Swiss franc and trimmed gains against the yen on Thursday on concerns over Deutsche Bank, while increased expectations for a December Federal Reserve rate hike kept the greenback generally afloat.

The franc and the yen, which are perceived to be safe-havens, benefited from the worries surrounding Germany’s biggest lender. U.S.-listed shares of Deutsche Bank <DB.N>, which is fighting a $14 billion U.S. demand to settle claims over mortgage-backed securities, fell by more than 8 percent after touching record lows in Europe this week.

Bloomberg, citing an internal bank document, reported on Thursday that about 10 hedge funds that use Deutsche Bank’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week.

The dollar hit 0.9641 franc <CHF=>, its lowest level against the Swiss currency since Aug. 26. Against the yen, the dollar eased from a more than 1 percent gain and an eight-day high of 101.84 yen <JPY=>, and was last just 0.41 percent higher against the Japanese currency at 101.06.

“Dollar/yen gave up some of the gains as concerns about the European banking sector moved back to the forefront,” said Vassili Serebriakov, FX strategist at Credit Agricole in New York.

Increased expectations that the Fed would raise interest rates in December kept the dollar from falling against a basket of major currencies.

Higher oil prices after OPEC reached a deal on Wednesday to cut output and U.S. Commerce Department data showing gross domestic product expanded at an upwardly revised 1.4 percent annual rate in the second quarter helped boost those expectations.

Traders saw a 56.4 percent chance that the Fed would hike in December, up from a 53.1 percent chance on Wednesday, according to CME Group’s FedWatch program.

The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.09 percent at 95.518 <.DXY>.

Despite the concerns surrounding Deutsche Bank, the euro was last flat on the day at $1.1216 on limited worries that the bank’s issues would spread to other European lenders or create a systemic crisis for the euro zone.

“We do not expect any kind of contagion to the broader banking sector,” said Brittany Baumann, macro strategist at TD Securities in Toronto.

Currencies of commodity exporters such as the Norwegian crown <NOK=> and the Canadian dollar <CAD=> were down against the U.S. dollar after rallying Wednesday on questions over the feasibility of OPEC implementing its new deal.

(Reporting by Sam Forgione; Editing by Dan Grebler and Meredith Mazzilli)