* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
(Recasts after U.S. data, updates)
LONDON, Dec 10 (Reuters) - The dollar shed early gains and
turned lower on Friday after U.S. consumer prices increased
further in November, posting their largest annual rise in 39
years as investors took profits before a Federal Reserve meeting
next week.
The data, along expected lines, puts added pressure on
policymakers to withdraw pandemic-era stimulus at a faster pace
in coming months.
"There is some relief that we did not get a 7 (percent)
handle on headline inflation and the dollar response is
partially because there is a lot priced into the markets already
in terms of rate expectations next year," said Kenneth Broux, an
FX strategist at Societe Generale in London.
Against a basket of its rivals, the dollar briefly
fell 0.1% to 96.10 before trimming losses in volatile trading.
Money markets expect more than 60 bps in rate hikes from the
U.S. central bank next year.
The consumer price index rose 0.8% last month after surging
0.9% in October, the Labor Department said on Friday. In the 12
months through November, CPI accelerated 6.8%. That was the
biggest year-on-year rise since June 1982 and followed a 6.2%
advance in October.
The dollar's losses pushed other currencies higher with
sterling edging 0.2% higher to $1.324.
The euro, seen as vulnerable to a Federal Reserve
hike especially if euro zone rate rises lag, trimmed losses to
stand down 0.1% on the day at $1.1281.
Elsewhere, China's yuan fell in onshore and
offshore markets after the People's Bank of China
(PBOC) raised FX reserve requirements for the second time since
June, and was further pressured when the central bank set its
trading band midpoint weaker than expected.
(Reporting by Tommy Wilkes and Saikat Chatterjee; Editing by
Krishna Chandra and John Stonestreet)